THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/economichistoryoOOvanmiala 


Simeticm  3u^im00  &et«0 

ROSWELL  C.  McCREA 

GENERAL   EDITOR 


ECONOMIC  HISTORY 

OF  THE 

UNITED  STATES 


BY 
THURMAN  W.  VAN  METRE,  A.M.,  Ph.D, 

Associate  Professor  in  Columbia  University 


NEW  YORK 
HENRY  HOLT  AND  COMPANY 

1921 


Copyright,  1921, 

BY 

HENRY  HOLT  AND   COMPANY 
April,  1023 


PRINTED  IN  U.  S.  A. 


w 


Bus.  Admin. 
Library 

.    '        TABLE  OF  CONTENTS    ^3  J 
PART  I.     INTRODUCTORY 

CHAPTER  PAGE 

I.    Resources  and  People 3 

II.     The  Discovery,  Exploration  and  Appro- 
priation OF  America 18 

III.  Colonization 33 

PART  II.  THE  COLONIAL  PERIOD 

IV.  Early  Industry  and  Commerce,  1607-1660     55 
V.     English  Colonial  Policy,  1660-1763     .      .     75 

VI.     Colonial  Development,  1660-1763    ...     90 
VII.     The  New  Colonial  Policy  and  Its  Results  120 

PART  III.     THE  NEW  NATION 

VIII.  The  Revolution 139 

IX.  An  Economic  Crisis  ;  The  Constitution     .   164 

X.  The  New  Government 187 

XI.  The  Struggle  for  Neutrality     ....  205 

XII.  Internal  Conditions,  1795-1819  .    .      .      .222 

PART  IV.     THE  AMERICAN  SYSTEM 

XIII.  Protective  Tariffs 251 

XIV,  Internal  Improvements 263 

XV.     Industrial  and  Commercial  Expansion      .   286 

XVI.     Currency   and   Ranking  ;    The    Panic   of 

1837 304 

iii 


1621024 


iv  TABLE  OF  CONTENTS 

PART  V.  OCCUPATION  OF  THE  GREAT 
WEST 

CHAPTER  PAGE 

XVII.     Territorial    and    Industrial    Expansion, 

1840-1860 323 

XVIII.     Domestic  Trade;  Foreign  Trade;  Shipping, 

1840-1860 356 

XIX.     The  Civil  War 373 

XX.     Expansion  ;  Speculation  ;  Crisis,  1865-1873  390 

PART  VI.     LARGE  SCALE  PRODUCTION 
AND  COMPETITION 

XXI.     Large  Scale  Production 415 

XXII.     Prices  and  Wages;  Labor  Troubles;  Early 

Industrial    Combinations       ....  441 

XXIII.  Currency  Disorder  and  the  Panic  of  1893  475 

PART  VII.     INDUSTRIAL  COMBINATION 
AND  GOVERNMENT  REGULATION 

XXIV.  Industrial  Combination 501 

XXV.     Government  Regulation  of  Business  .      .   518 

XXVI.     Economic  Progress,  1897-1914    ....   541 
XXVII.    Economic  Aspects  of  the  World  War  .     .  590 

Statistical  Appendix .  629 

Collateral  Reading  639 

Index 647 


MAPS,  CHARTS,  AND  ILLUSTRATIONS. 

PAGE 

Manhattan  Island  in  1702 4 

Manhattan  Island,  1921 5 

Iron  Ore  Deposits  in  the  United  States 9 

Coal  Deposits  in  the  United  States 10 

Power  Dam  Across  the  Mississippi  River  at  Keokuk  .     12 

North  America  in  1713 28 

North  America  in  1763 30 

Sir  Walter  Raleigh 37 

Captain  John  Smith 38 

William  Penn 44 

Jamestown  in  1622 56 

Farm  Implements  of  the  Eighteenth  Century    ...     61 

Spinning  Wheel 99 

Hand  Loom 100 

Colonial  Stage  Coach 112 

Stage  Coach  Advertisement,  1771 114 

Announcement  of  the  Suspension  of  the  Pennsylvania 

Journal  because  of  the  Stamp  Act 124 

British    Stamp         125 

Samuel   Adams 133 

Early   Continental   Currency 140 

Continental    Currency 141 

A  Page  of  Washington's  Account  Book 144 

Benjamin  Franklin 151 

Daniel  Boone 153 

Boonesborough         155 

Pack-Horses 156 

V 


vi         MAPS,  CHARTS  AND  ILLUSTRATIONS 

PAGE 

The  United  States  at  the  Peace  of  1783 161 

Independence  Hall,  Philadelphia 177 

Fitch 's  Second  Steamboat 182 

Fitch's  Third  Steamboat 183 

George  Washington 188 

Samuel  Slater 196 

Eli  Whitney 198 

Model  of  Conestoga  Wagon 200 

John  Jay 209 

Flatboat  on  the  Mississippi 224 

Robert   Fulton 227 

The  Clermont 228 

Francis  C.  Lowell 229 

Early  Steamboat  on  the  Ohio  River 243 

Cincinnati  in  1820 244 

Canals  of  the  United  States  in  1855 268 

Completion  of  the  Erie  Canal 270 

Canal  Boat  Travel  and  Trade 272 

Inclined  Plane  at  Mauch  Chunk,  Pennsylvania   .      .   276 

The  Rocket 277 

The  Stourbridge  Lion 273 

First  Passenger  Car  on  the  Baltimore  and  Ohio  Rail- 
road         279 

The  Tom  Thumb 280 

Stone  Marking  the  Spot  Where  Construction  of  the 
Baltimore  and  Ohio  Railroad  Was  Begun,  July  4, 

1828        281 

The  York 282 

DeWitt  Clinton  and  Train,  1831 283 

The  Twentieth  Century  Limited 284 

Model  of  the  Sfivannah 301 

Henry  Clay 307 


MAPS,  CHARTS  AND  ILLUSTRATIONS        vii 

PAGE 

Andrew  Jackson 308 

Emigrants  Crossing  the  Plains 328 

Cyrus  H.  McCormick 330 

A  Reaper  of  1860 331 

Auction  of  Slaves  in  New  Orleans,  1842 334 

Elias  Howe 336 

Railroads  of  the  United  States  in  1860 346 

S.  F.  B.  Morse 350 

Cyrus  W.  Field 351 

Steamboats  on  the  Mississippi,  1860 361 

New  Orleans  in  1860 362 

The  Rainbow 366 

Clipper  Ship 367 

The  Adriatic 369 

Abraham  Lincoln 374 

Salmon  P.  Chase 380 

Completion  of  the  Union  Pacific  Railroad  ....   391 

George  M.  Pullman 392 

Prices  and  Wages,  1840-1890 404 

Cream  Separator 420 

A  Modem  Linotype 424 

Alexander   Graham   Bell 428 

Thomas  A.  Edison 429 

The  First  Pierce-Arrow  Motor  Car  .      .      ...      .      .  430 

George  Westinghouse 432 

Grover  Cleveland 493 

Theodore  Roosevelt 521 

Tapping  an  Open  Hearth  Furnace 544 

Pouring  Steel  into  Ingot  ^Moulds 545 

Hot  Ingots  Passing  through  Rolls 546 

A  Modern  Motor  Truck 547 

The  Packard  Motor  Car  Factory  at  Detroit  .      .      .      .548 


viii       MAPS,  CHARTS  AND  ILLUSTRATIONS 

PAGE 

Machines  Equipped  with  Individual  Electric  Motors  .  551 

Orange  Groves  in  Southern  California 552 

Packing  Oranges  for  Shipment 553 

Old  Fashioned  Coke  Ovens 558 

By-Produet  Coke  Ovens  at  Joliet,  Illinois  ....  560 

Railroads  in  the  United  States,  1920 562 

Electrification   of   the   New   York,   New   Haven    and 

Hartford  Railroad 564 

Pennsylvania  Railroad  Train  Emerging  on  Manhattan 

Island  from  Tunnel  under  Hudson  River  .      .      .   565 

Loading  Coal  at  Cleveland 567 

Unloading  Coal  at  Duluth 567 

Loading  Ore  at  Duluth 568 

Unloading  Ore  at  Cleveland 569 

Old  and  New  Locks  of  the  New  York  Canal  System  .  570 
Modern  Barge  on  the  New  York  Barge  Canal  .      .      .  570 

A  Modern  Grain  Elevator,  Buffalo 571 

Grain  Elevators  at  Buffalo 572 

Federal  Reserve  Districts 584 

Fifty  Shipways  at  Hog  Island 606 

The  Quistconck,  Built  at  Hog  Island 607 

Trend  of  Wholesale  Prices,  1890-1920 615 

Movement  of  Prices  during  the  World  War      .      .     .  617 


PART  I 
INTRODUCTORY 


INTRODUCTION 

CHAPTER  I 

RESOURCES  AND  PEOPLE 

Wealth  of  the  United  States.  In  1912  the  Bureau  of  the 
Census  of  the  United  States  estimated  the  total  wealth  of 
the  nation,  in  terms  of  money,  to  be  $187,730,071,090. 
This  wealth  consisted  of  land  and  buildings,  live  stock,  farm 
implements,  manufacturing  plants  and  their  equipment, 
railways,  street  car  lines,  light  and  power  stations  and  other 
public  utilities  such  as  telegraph  and  telephone  systems, 
all  kinds  of  agricultural  and  manufactured  products,  min- 
ing products,  personal  property  of  various  kinds,  and  gold 
and  silver.  "We  like  to  think  of  the  United  States  as  the 
richest  and  most  prosperous  nation  in  the  world ;  we  have 
pride  in  the  fact  that  with  its  huge  production  of  cereals, 
meats,  and  cotton,  this  country  performs  a  greater  part  in 
feeding  and  clothing  the  world  than  any  otlier  single  coun- 
try; with  its  output  of  coal,  iron  and  copper,  it  has  a  fore- 
most position  among  modern  industrial  nations. 

Not  only  does  the  Ignited  Stales  stand  out  as  one  of  the 
richest  and  most  prosperous  nations  in  the  world,  but  its 
people  have  a  greater  well-beintr  as  individuals  than  the 
people  of  other  countries.  The  standard  of  living  is  higher 
than  in  other  countries;  the  money  wages  received  by  labor- 
ers are  higher  than  the  money  wages  received  by  workers  in 
other  lands,  and  though  the  prices  of  goods  are  somewhat 
high,  the  real  wages  of  the  workers — food,  clothing,  shelter 
and  many  comforts  and  conveniences — are  enjoyed  in 
greater  abundance  by  citizens  of  this  country  than  by 
the    people   living  under   any   foreign   government.     The 

3 


4  RESOURCES  AND  PEOPLE 

United  States  is  a  wonderful  country  to  live  in ;  its  people 
have  a  high  degree  of  contentment ;  the  individual  has 
great  opportunities  for  advancement.  Education  is  free, 
the  varied  industries  and  professions  are  open  to  all  on 
equal  terms,  success  in  life  is  possible  for  anybody  who 
possesses  energy,  mental  capacity  and  a  will  to  work  with 
diligence  and  perseverance. 

United  States  a  Young"  Nation.     The  most  remarkable 
feature  of  the  history  of  the  United  States  is  the  fact  that 


^fanhattan  Island  in  1702 

its  great  economic  development  has  taken  place  within  a 
comparatively  brief  space  of  time.  When  one  thinks  of 
the  millions  of  prosperous  people  now  living  in  this  country, 
of  the  great  numbers  of  fine  farms  with  their  comfortable 
homes,  of  the  splendid  cities  with  their  busy  factories,  their 
bustling  shops,  their  great  l)uildings,  of  the  huge  railway 
system  which  spreads  like  a  net  over  the  entire  country,  of 
the  fleets  of  merchant  vessels  which  carry  a  multitude  of 


RESOURCES  AND  PEOPLE  5 

valuable  products  to  and  from  our  ports,  of  the  public 
schools,  colleges,  universities,  and  churches,  of  the  thou- 
sands of  conveniences  which  we  have  to  make  living  con- 
ditions more  pleasant,  it  is  hard  for  one  to  realize  that  a 
little  more  than  three  hundred  years  ago  the  land  from 
coast  to  coast  was  a  wilderness  peopled  only  by  a  few  hun- 
dred thousand  savages;  that  only  one  hundred  years  ago 
the  vast  territory  between  the  Mississippi  River  and  the 
Rocky  Mountains  was  just  beginning  to  be  settled;  that 
only  fifty  years  ago  the  first  railroad  line  was  constructed 
from  the  Missouri  River  to  the  Pacific  coast. 


Manhattan  Island,  1921 

The  nation  is  still  in  its  youth.  We  have  grown  in 
population  since  1789  from  three  million  to  more  than  one 
hundred  million,  but  there  is  ample  room  for  more  millions, 
and  doubtless  the  people  who  will  be  living  a  hundred  years 
hence  will  look  back  upon  our  times  with  much  the  same 
thoughts  that  come  to  us  when  we  reflect  upon  the  conditions 
of  a  century  ago. 

How  Our  Development  Has  Been  Accomplished.  It  is 
our  purpose  to  study  the  economic  growth  of  the  United 
States  and  to  trace  the  process  by  which  a  huge  wilderness 
was  transformed  into  the  home  of  a  prosperous,  happy  and 


6  RESOURCES  AND  PEOPLE 

powerful  nation.  We  shall  want  to  know  what  conditions 
made  development  possible  and  we  shall  observe  the  steps 
by  which  the  nation  achieved  its  success. 

The  material  progress  of  a  country  depends  chiefly  upon 
two  things:  the  resources  of  nature  and  the  character  of 
the  people.  Without  natural  resources  no  people,  how- 
ever energetic  and  thrifty  they  may  be,  can  make  great 
industrial  progress.  On  the  other  hand,  a  country  may 
have  abundant  natural  wealth  but  remain  in  a  low  state 
of  development  because  the  people  lack  initiative  and 
ability.  In  the  United  States  there  has  been  a  fortunate 
combination  of  an  intelligent  and  industrious  population 
and  a  land  whose  natural  resources  are  unequaled  in 
variety,  quality  and  quantity.  It  is  this  combination 
which  has  made  it  possible  for  our  country  to  reach  its 
high  position  among  the  nations  of  the  world  in  such  a 
brief  period  of  time. 

Extent  of  Our  Natural  Resources.  Mr.  Franklin  K. 
Lane,  while  Secretary  of  Interior,  said  of  the  extent  and 
variety  of  resources  of  the  United  States : 

"With  the  exception  of  one  or  two  minor  minerals, 
the  United  States  produces  every  mineral  that  is  needed 
in  industry,  and  this  can  be  said  of  no  other  country. 
We  produce  66  per  cent,  of  the  world's  output  of 
petroleum,  60  per  cent,  of  its  copper,  40  per  cent,  of 
its  coal  and  iron,  and  32  per  cent,  of  its  lead  and 
zinc.  .  .  . 

"We  can  build  a  battleship  or  an  automobile  (ex- 
cepting the  tires),  a  railroad  or  a  factory,  entirely  from 
the  products  of  American  mines  and  forests.  .  .  . 

"Our  soil  and  climate  are  so  varied  that  we  can  pro- 
duce all  the  grains,  fruits,  vegetables,  and  fibers  known 
to  the  Temperate  Zone  and  some  found  in  the  semi- 
tropics.  And  to  crown  all  these,  we  have  water  power 
that  can  be  made  to  generate  as  much  as  60,000,000 
horse  power." 


RESOURCES  AND  PEOPLE  7 

Climate.  One  of  the  most  valuable  gifts  of  nature  is 
a  suitable  climate.  The  United  States  lies  in  the  North 
Temperate  Zone  where  recurring  seasons  of  warmth  and 
coolness  furnish  Incentive  for  working  and  saving.  The 
wealthy  and  progressive  nations  of  the  world  are  situated 
in  latitudes  where  the  variations  of  heat  and  cold  are 
similar  to  the  variations  experienced  in  the  United  States. 
There  is  no  part  of  the  United  States  so  cold  that  farming 
is  impracticable,  and  there  is  no  part  so  hot  that  the  in- 
habitants find  it  impossible  to  engage  in  active  labor.  At 
the  same  time,  the  range  of  temperature  in  the  United 
States  is  sufficiently  great  to  permit  the  raising  of  the 
characteristic  products  of  both  the  cooler  latitudes  and  the 
subtropics. 

Of  equal  importance  with  a  favorable  temperature  is. 
adequate  moisture.  Here  again  the  United  States  is 
singularly  fortunate.  An  annual  rainfall  of  at  least  20 
inches  is  necessary  for  successful  agriculture.  The 
average  annual  rainfall  of  the  United  States  as  a  whole  is 
almost  30  inches.  The  eastern  and  southeastern  sections 
of  the  country  have  the  greatest  average  rainfall,  and 
while  the  average  decreases  toward  the  west,  it  is  not  un- 
til we  pass  the  one  hundredth  meridian  of  longitude  and 
approach  the  Rocky  Mountain  highland  that  we  find  a 
region  where  the  dryness  of  the  climate  prevents  agri- 
culture. Even  in  the  arid  regions  there  are  great  areas 
of  grazing  land,  and  large  numbers  of  farms  for  which  the 
necessary  moisture  is  provided  by  irrigation.  The  Pacific 
Coast  region,  except  the  southern  half  of  California,  has 
abundant  rainfall. 

Soil.  The  fertile  soil  of  the  United  States,  more  than 
any  other  single  resource,  has  drawn  settlers  from  the  Old 
"World.  The  central  portion  of  the  country — the  great 
valley  drained  by  the  Mississippi   River  and  the   Great 


8  RESOURCES  AND  PEOPLE 

Lakes — is  the  finest  farming  region  in  the  world.  The 
broad  coastal  plain  extending  along  the  Atlantic  coast 
south  of  New  England,  though  not  so  fertile  as  the  IMissis- 
sippi  Valley,  is  quite  as  suitable  for  agriculture  as  much  of 
the  land  of  Europe.  In  the  piedmont  region,  or  eastern 
foot-hills  of  the  Appalachian  highland,  may  be  found  some 
of  the  most  prosperous  agricultural  sections  of  the  United 
States ;  and  the  beautiful  valleys  of  the  Appalachian  high- 
lands, such  as  the  Susquehanna,  the  Cumberland  and  the 
Shenandoah,  have  long  been  renowned  for  their  fertile 
soil.  In  hilly  New  England  there  is  a  large  acreage  of  ex- 
cellent farm  land,  though  the  fertility  of  New  England 
soil  as  a  whole  is  less  than  that  of  the  land  to  the  south 
and  west. 

.  Between  the  100th  meridian  and  the  crest  of  the  Rocky 
Mountain  highland  much  fertile  land  remains  untilled  be- 
cause of  the  lack  of  sufficient  moisture.  Large  areas  have 
been  reclaimed  by  irrigation,  and  much  more  of  this  terri- 
tory will  be  brought  under  cultivation  in  the  future. 
"West  of  the  Rocky  jMountains  the  river  valleys  of  Wash- 
ington, Oregon,  and  northern  California  contain  some  of 
the  best  grain  producing  land  in  the  United  States,  and  the 
land  of  southern  California  is  equally  fertile,  though  hav- 
ing less  rainfall. 

Minerals.  In  the  possession  of  the  three  leading  min- 
erals of  modern  industry — coal,  iron  and  copper — the 
United  States  surpasses  all  other  countries. 

The  Appalachian  coal  field,  extending  from  New  York  to 
Alabama,  and  the  coal  field  of  Illinois,  Indiana  and  Ken- 
tucky are  the  most  important  producing  regions.  There 
are  extensive  fields  in  the  States  west  of  the  Mississippi 
River  which  have  been  worked  but  slightly. 

Iron,  the  most  useful  of  all  metals,  is  found  in  workable 
quantities  in  more  than  one-half  the  States.  The  greatest 
deposits  are  in  the  ' '  ranges ' '  south  and  west  of  Lake  Supe- 


RESOURCES  AND  PEOPLE  9 

rior  in  Minnesota,  Wisconsin  and  the  northern  peninsula  of 
Michigan,  The  Appalachian  highland  is  also  a  great  store- 
house of  iron  ore,  the  chief  center  of  production  being  the 
district  around  Birmingham,  Alabama. 

The  United  States  produces  more  than  one-half  of  the 
world's  annual  supply  of  copper.  Copper  is  one  of  the 
best  conductors  of  electricity  and  the  demand  for  this 
metal  in  the  manufacture  of  wire  and  machinery  has 
greatly  increased  in  recent  years  because  of  the  extensive 
use  of  electrical  power.     The  manufacturing  nations  of 


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Iron  Ore  Deposits  in  the  United  States 

western  Europe  use  large  quantities  of  copper,  much  of 
which  is  purchased  in  the  United  States. 

Many  other  minerals  are  included  among  the  natural 
resources  of  the  United  States.  The  precious  metals,  gold 
and  silver,  have  been  taken  in  abundance  from  the  gravels 
and  rocks  of  the  Rocky  Mountain  region.  Lead,  zinc  and 
aluminum  are  important  mineral  products  of  which  nature 
has  given  this  country  a  generous  supply.     Tin  is  the  only 


10 


RESOURCES  AND  PEOPLE 


metal  used  extensively  in  the  manufacturing  industries  of 
the  United  States  which  must  be  procured  almost  entirely 
from  foreign  lands.  Among  other  mineral  products  which 
have  served  to  create  extensive  industries  and  add  to  the 
well  being  of  the  people  are  petroleum,  the  clays  used  in 
making  brick,  tile  and  pottery,  and  many  useful  varieties 
of  stone,  such  as  limestone,  sandstone,  slate,  granite  and 
marble. 
Coast  Line  and  Navigable  Waters.    Among  the  useful 


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Coal  Deposits  in  the  United  States 

gifts  which  nature  has  bestowed  in  abundance  upon  the 
United  States  are  splendid  natural  harbors,  long  rivers,  and 
large  lakes,  by  means  of  which  the  people  may  carry  on 
domestic  and  foreign  trade. 

The  Atlantic  coast  in  particular  is  well  provided  with 
harbors.  On  this  coast,  at  the  mouths  of  rivers  or  by 
inlets  of  the  sea,  may  be  found  great  commercial  cities 
through  which  passes  much  of  our  trade  with  foreign 
nations.     Though  not  possessing  a  large  number  of  good 


RESOURCES  AND  PEOPLE  11 

harbors,  the  Pacific  coast  has  a  few  of  great  excellence, 
such  as  San  Francisco  Bay,  Puget  Sound,  and  Columbia 
River. 

The  Great  Lakes  provide  a  waterway  of  great  importance 
in  our  domestic  commerce.  The  Mississippi  River  and 
its  tributaries  afford  thousands  of  miles  of  navigable  water 
in  the  heart  of  the  country.  Though  this  river  sys- 
tem is  used  but  little  for  transportation  at  present,  it  had, 
as  we  shall  see,  a  period  of  very  great  usefulness  before 
railroads  were  common.  There  is  little  doubt  that  at  some 
time  in  the  future  the  Mississippi  will  again  be  of  much 
commercial  service.  Other  rivers  flowing  into  the  Gulf 
of  Mexico  and  the  Atlantic  Ocean,  as  well  as  the  rivers  of 
the  Pacific  coast,  are  of  small  commercial  importance  ex- 
cept in  cases  where  they  provide  harbors  for  ocean  vessels. 
Like  the  Mississippi,  however,  many  of  these  rivers  once 
carried  much  traffic  and  they  may  be  used  extensively 
again  for  transportation  purposes. 

Water  Power.  IMany  streams  of  the  United  States  are 
being  used  to  develop  power  to  turn  the  wheels  of  factories 
and  to  operate  vehicles  for  the  movements  of  passengers  and 
freight.  Though  water  power  has  long  been  used  as  a 
source  of  energy  in  industry,  after  the  invention  of  the 
steam  engine  its  relative  importance  rapidly  declined. 
Now  that  we  are  extending  the  use  of  electricity  as  a  motive 
force  we  are  once  more  placing  a  high  value  upon  water 
power. 

There  are  many  places  in  the  United  States  where  water 
power  is  now  employed  and  there  are  great  numbers  of 
water  power  sites  to  be  developed  in  the  future.  Niagara 
Falls  has  been  harnessed  and  supplies  the  power  which 
gives  light  to  several  cities  and  drives  the  machinery  of 
many  factories.  At  Keokuk,  Iowa,  a  huge  dam  has  been 
built  across  the  Mississippi  and  hydro-electric  machinery 
installed  capable  of  developing  300,000  horsepower.     The 


12  RESOURCES  AND  PEOPLE 

trains  on  the  mountain  division  of  the  Chicago,  Milwaukee 
and  St.  Paul  Railroad  are  drawn  by  electric  locomotives 
which  receive  their  power  from  hydro-electric  plants,  the 
largest  of  which  is  at  Great  Falls,  Montana.  These  are 
but  a  few  of  the  instances  of  the  successful  use  of  the 
power  which  nature  has  provided  in  our  streams. 

Plant  and  Animal  Life.  Chief  among  the  plants  of 
natural  growth  in  the  United  States  are  grass  and  the 
great  forests.  Trees  are  useful  principally  because  of 
their  timber  products,  but  there  are  many  varieties  which 
supply  useful  bark,  saps,  leaves  and  fruits.     At  one  time 


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Power  Dam  Across  the  Mississippi  at  Keokixk 
Courtesy  of  Keokuk  Chamber  of  Commerce 

the  region  ^ast  of  the  Mississippi  River  was  virtually  cov- 
ered with  trees,  so  densely  covered  in  fact  that  the  settle- 
ment of  the  country  was  seriously  impeded.  INIuch  of 
the  land  has  long  been  cleared,  and  in  the  process  of 
clearing,  a  great  deal  of  timber  was  necessarily  cut  down 
and  destroyed.  It  was  thought  that  the  supply  of  timber 
was  inexhaustible  and  little  effort  was  made  even  to  pre- 
vent useless  destruction.  We  finally  began  to  realize  that 
there  was  danger  of  a  complete  disappearance  of  our  forest 


RESOURCES  AND  PEOPLE  13 

resources,  and  steps  were  taken  to  put  an  end  to  waste. 
Happily,  forests,  unlike  mineral  resources,  are  capable  of 
replacement.  We  are  not  only  endeavoring  to  be  eco- 
nomical in  the  use  of  existing  forests  but  we  are  encourag- 
ing the  planting  of  trees  to  take  the  place  of  those  cut 
down. 

Notwithstanding  the  waste  of  past  years,  the  United 
States  still  has  a  great  supply  of  valuable  standing  timber. 
The  fine  forests  of  New  England  and  the  Great  Lakes  re- 
gion are  not  entirely  exhausted,  and  there  are  still  large 
areas  in  the  Mississippi  Valley  covered  with  hardwood 
forests  of  oak,  hickory  and  walnut.  The  yellow  pine 
forests  of  the  South  and  the  redwood,  pine,  and  fir  regions 
of  the  Pacific  States  are  now  the  leading  sources  of  timber. 

One  of  the  most  important  natural  resources  that  have 
contributed  to  the  wealth  and  prosperity  of  the  people 
of  the  United  States  has  been  the  wild  grasses.  The  graz- 
ing lands  along  the  Atlantic  coast  made  it  possible  for  the 
earliest  settlers  to  have  great  herds  of  cattle  and  hogs. 
The  eastern  half  of  the  United  States  still  contains  large 
areas  of  hitherto  untilled  pasture  lands.  It  was  on  the 
wide  prairies  and  plains  of  the  "West  however  that  the 
grazing  industry  had  its  greatest  development.  Countless 
thousands  of  cattle,  sheep,  and  horses  have  been  raised  on 
the  land  which  was  once  the  feeding  grounds  of  bison, 
elk  and  deer. 

Aside  from  grass  and  trees  there  is  no  uncultivated 
plant  life  in  the  LTnited  States  which  forms  the  basis  of 
any  considerable  industry.  However,  there  are  large 
numbers  of  "wild"  vines,  shrubs,  and  weeds  from  which 
fruits,  chemicals  and  drugs  are  derived.  ^Moreover,  a 
great  many  of  our  best  cultivated  fruits  and  vegetables 
were  originally  part  of  the  natural  growth  of  American 
fields  and  forests. 

The  leading  source  of  wealth  from  natural  animal  life  at 


14  RESOURCES  AND  PEOPLE 

present  is  the  fisheries.  Both  the  Atlantic  and  the  Pacific 
Ocean  give  us  great  quantities  of  food  fish.  From  the 
numerous  shallow  bays  and  inlets  of  the  Atlantic  coast 
come  oysters  and  other  kinds  of  shellfish.  The  salmon 
fisheries  of  the  rivers  flowing  into  the  Pacific  Ocean  rank 
high  among  the  fisheries  of  the  world.  The  Great  Lakes 
and  virtually  all  the  larger  rivers  of  the  United  States  have 
valuable  fisheries. 

Wild  animals,  useful  for  food,  fur  and  skins,  are  still 
abundant  in  some  sections  of  the  United  States.  However, 
in  the  process  of  clearing  the  land  and  making  way  for  agri- 
culture and  other  industries,  the  wild  animals  of  direct 
economic  value  have  been  deprived  of  space  in  which  to 
live,  and  their  number  has  diminished.  Hunting  and  trap- 
ping no  longer  occupy  the  rank  among  our  industries  which 
they  held  when  the  country  was  thinly  settled.  We  en- 
deavor when  possible,  to  preserve  all  useful  forms  of  wild 
animal  life. 

The  United  States  a  World  in  Itself.  On  account  of 
the  great  natural  resources  which  this  country  possesses 
Prof.  J.  Russell  Smith  says: 

"The  United  States  is  a  world  in  itself.  It  has  a  great 
abundance  and  variety  of  natural  resources,  and  a  very 
favorable  climate.  These  things  have  made  it  the  richest 
nation  in  the  world  and  have  enabled  it  to  have  varied 
industries.  Its  lands  range  from  the  subtropic  orange 
groves  of  Florida  and  California  to  the  cold  temperate 
shores  of  Lakes  Superior  and  Champlain.  Its  rainfall 
varies  from  the  deserts  of  the  Great  Basin  to  the  heavy 
soakings  of  West  Washington  and  Louisiana.  Its  fields 
and  forests  are  vast  and  its  rich  mines  yield  all  the 
important  minerals  except  tin  and  potash,  and  we  have 
recently  found  a  new  way  to  secure  potash  from  the 
sea." 

The  People  of  the  United  States.  The  white  people  of 
the  United  States  are  derived  chiefly  from  the  best  stocks 


RESOURCES  AND  PEOPLE  15 

of  Europe,  because  of  which  the  United  States  is  often 
called  the  ''melting  pot  of  nations."  The  mixture  of  blood 
has  produced  a  sturdy  and  energetic  people.  The  physi- 
cal excellence  of  the  Americans  is  shown  by  the  producing 
power  of  the  nation's  labor,  by  the  strength  and  endur- 
ance of  its  soldiers,  and  by  the  success  of  its  youth  in  inter- 
national athletic  contests. 

Not  only  have  the  Americans  excelled  in  physical 
strength  but  they  have  possessed  the  spirit  of  earnestness 
and  perseverance  equally  necessary  for  the  task  of  devel- 
oping the  natural  resources  of  the  country.  The  difficulty 
and  magnitude  of  the  work  have  not  daunted  them.  They 
have  moved  ahead  swiftly  and  vigorously. 

A  marked  characteristic  of  the  American  people  has 
been  the  inventive  genius  displayed  in  devising  tools  and 
machines.  All  branches  of  modern  industry  are  indebted 
to  American  inventors  for  mechanical  improvements  which 
have  increased  largely  the  productive  power  of  labor. 
The  occupation  of  the  continent  would  have  been  a  much 
slower  and  more  difficult  process  had  it  not  been  for  in- 
ventions which  the  Americans  have  contributed  in  agricul- 
ture, transportation,  mining  and  manufacture. 

Another  field  in  which  American  genius  has  shown  note- 
worthy results  is  the  field  of  business  organization.  The 
country  owes  much  to  its  ''captains  of  industry" — mer- 
chants, manufacturers,  railroad  builders,  bankers  and 
others — for  their  skill  in  organization  and  supervision. 
Leadership  is  always  essential  to  the  success  of  any  great 
enterprise,  and  Americans  with  capacity  for  leadership 
have  not  been  lacking. 

It  must  not  be  thought  that  the  energy  and  intellect  of 
the  American  people  have  been  devoted  entirely  to  business 
pursuits.  The  United  States  has  furnished  leaders  and 
teachers  in  the  world  of  science  and  of  art.  In  all  the 
natural  sciences,  in  law  and  politics,  in  medicine  and  sur- 


16  RESOURCES  AND  PEOPLE 

gery,  in  literature,  painting  and  sculpture,  Americans  have 
attained  eminence  and  distinction. 

There  are  some  11,000,000  members  of  the  Negro  race 
in  the  United  States,  descended  chiefly  from  former  slaves 
whose  ancestors  lived  in  tropical  Africa.  Since  Negro 
slaves  were  brought  to  our  shores  soon  after  the  first  set- 
tlement was  established,  the  history  of  the  Negro  race  in 
the  United  States  covers  virtually  the  same  length  of  time 
as  the  history  of  the  white  race.  Though  out  of  slavery 
for  only  a  little  more  than  half  a  century,  and  but  shortly 
removed  from  an  uncivilized  ancestry,  the  Negro  race  in 
the  United  States  has  made  great  progress.  There  is  no 
better  proof  of  the  advantages  of  the  natural  environment 
of  the  United  States  and  of  the  opportunity  for  the  suc- 
cessful development  of  a  people  than  the  improvement  of 
the  Negro  race  during  its  brief  period  of  freedom. 

Freedom  of  the  People.  A  factor  of  great  importance 
in  the  history  of  the  United  States  has  been  the  compara- 
tive freedom  of  the  individual  from  governmental  or  other 
interference  in  the  ordinary  affairs  of  life.  In  this  re- 
spect the  history  of  the  United  States  affords  a  striking 
contrast  to  the  history  of  all  European  countries,  whose 
people  have  been  subjected  to  religious  persecution,  to 
political  tj'ranny  and  misrule,  to  devastating  invasions  by 
migrating  races  or  by  enemy  nations.  The  government  of 
the  United  States  has  been  such  as  the  majority  of  the 
people  has  desired,  and  there  have  been  few  restrictions  on 
the  normal  activities  of  the  individual.  Men  have  been 
free  to  go  and  come  at  will,  to  choose  their  own  occupations, 
and  to  think  and  speak  freely.  Religious  freedom,  politi- 
cal freedom,  and  economic  freedom  have  been  the  watch- 
words of  our  national  history.  The  democratic  ideals  of 
the  United  States  have  been  one  of  the  strong  attractions 
of  this  country  for  the  people  of  oppressed  races  through- 
out the  world. 


RESOURCES  AND  PEOPLE  17 

The  freedom  from  external  and  internal  interference  has 
had  an  important  influence  on  American  history.  It  has 
made  economic  development — material  progress — the  chief 
concern  of  the  people.  Their  daily  activities  have  been 
directed  largely  toward  the  ordinary  business  of  "  making 
a  living."  The  great  problems  which  have  confronted  the 
nation  have  been  primarily  of  an  economic  nature,  and 
political  development  has  been  fashioned,  to  a  greater  de- 
gree than  the  political  growth  of  any  other  nation,  by 
economic  conditions.  The  causes  of  the  leading  events  in 
our  history  have  been  fundamentally  of  an  economic 
nature. 

Though  the  history  of  the  United  States  has  been  pri- 
marily "the  record  of  physical  achievement,"  emphasis  on 
mere  material  progress  has  not  caused  a  lack  of  other  and 
higher  ideals.  In  the  midst  of  wealth  accumulating  activi- 
ties we  have  steadfastly  endeavored  to  maintain  and  de- 
velop the  aspirations  and  purposes  of  a  free  people.  The 
United  States  has  stood  for  democracy  in  thought  and  in 
action,  and  is  a  leader  among  the  democratic  nations  of 
the  world.  Not  only  have  we  striven  to  preserve  freedom 
at  home,  but,  with  no  thought  of  selfish  purpose,  we  have 
gladly  given  of  our  "blood  and  treasure"  to  bring  the 
blessings  of  freedom  to  the  whole  world. 

Questions  and  Tones 

1.  Make  a  list  of  comforts  and  conveniences  now  en- 
joyed by  the  people  of  the  United  States  which  the  people 
of  a  century  ago  did  not  possess. 

2.  How  has  the  character  of  natural  resources  affected 
the  industrial  development  of  your  own  community? 

3.  Do  you  think  the  United  States  is  a  better  country 
to  live  in  than  any  other  country?     Why? 


CHAPTER  II 

THE  DISCOVERY,  EXPLORATION  AND  AP- 
PROPRIATION OF  AMERICA 

Discovery  of  America  a  Commercial  Venture.    It  was 

said  in  the  preceding  chapter  that  the  leading  events  of 
American  history  were  due  to  economic  causes.  The  dis- 
covery of  America  was  an  incident  of  a  great  commercial 
venture  which  was  commanding  the  attention  of  the  people 
of  Europe  during  the  fifteenth  century.  This  venture  was 
the  search  for  a  "new  route  to  the  Indies."  Columbus 
and  many  of  the  explorers  who  followed  him  were  inter- 
ested solely  in  finding  the  new  route.  Columbus  died  think- 
ing that  he  had  reached  the  East  Indies,  and  the  name, 
"Indians,"  which  he  gave  to  the  natives  of  America,  still 
remains  as  evidence  of  his  mistaken  belief. 

Why  were  the  Europeans  of  Columbus's  time  so  much 
interested  in  the  Indies,  and  why  were  they  seeking  for  a 
new  route? 

The  Levant  Trade.  For  several  centuries  before  Col- 
umbus made  his  famous  voyage,  the  chief  commerce  of 
the  world  was  that  between  Europe  and  the  Indies.  The 
center  of  this  trade  was  the  Levant,  a  name  given  to  the 
region  lying  about  the  eastern  end  of  the  Mediterranean 
Sea.  To  the  important  cities  of  the  Levant,  such  as  Con- 
stantinople, Antioch,  Jaffa  and  Cairo,  the  merchants  of  the 
East  sent  spices,  drugs,  dyes,  perfumes,  rugs,  carpets,  and 
precious  stones  to  be  sold  to  buyers  who  came  from  Europe. 
Among  Europeans,  the  merchants  of  the  Italian  cities, 
Venice  and  Genoa,  took  the  lead  in  the  Levant  trade.     For 

18 


DISCOVERY  AND  EXPLORATION  19 

the  most  part  they  gave  gold  and  silver  for  the  Eastern 
products,  but  they  also  gave  in  exchange  such  European 
products  as  tin,  lead  and  wool.  The  Venetian  and  Gen- 
oese merchants  carried  the  commodities  of  the  East  home, 
and  distributed  them  by  land  and  sea  routes  to  all  parts 
of  Western  Europe,  With  the  profits  of  their  large  com- 
merce the  two  Italian  cities  became  rich  and  powerful, 
though  unfortunately  they  wasted  much  wealth  and  many 
lives  in  numerous  wars  for  commercial  supremacy. 

The  Turkish  Invasions.  About  1300,  a  small  group  of 
Turks  living  in  Asia  IMinor,  started  out  on  a  career  of 
conquest.  They  made  one  successful  invasion  after  an- 
other and  gradually  spread  their  influence  until  by  1450 
all  of  Asia  Minor  and  a  large  part  of  the  Balkan  penin- 
sula was  under  Turkish  rule.  In  1453,  Constantinople,  the 
last  stronghold  of  civilization  in  southeastern  Europe  fell 
before  the  attack  of  the  invaders;  in  1517  they  cap- 
tured Cairo  and  the  entire  Levant  passed  under  their  con- 
trol. 

From  the  beginning  of  their  conquests  the  Turks  had 
interfered  with  the  Levant  trade.  They  murdered  the 
merchants  and  pillaged  caravans,  fleets  and  cities.  The 
capture  of  Constantinople,  while  it  did  not  put  an  end 
to  the  commerce  with  the  East,  was  a  blow  from  which 
the  trade  could  not  possibly  recover,  and  when  the  Turks 
marched  into  Cairo,  the  trade  with  the  East  by  way  of 
the  Levant  cities  came  to  a  close. 

The  Search  for  a  New  Route.  As  the  Turkish  conquests 
proceeded  it  became  apparent  that  the  Europeans  must 
either  give  up  their  commerce  with  the  Indies  or  find  a  new 
route  over  which  the  trade  could  be  conducted.  They 
were  unwilling  to  see  the  trade  vanish  because  they  had 
become  accustomed  to  the  luxuries  of  the  East.  More- 
over the  profits  to  be  derived  from  the  trade  were  large 
enough  to  induce  a  general  search  for  a  practicable  route 


20  DISCOVERY  AND  EXPLORATION 

not  beset  by  such  dangers  as  those  which  were  gradually 
bringing  to  a  close  the  commerce  of  the  Levant. 

The  search  was  eagerly  pursued.  Some  adventurous 
explorers  tried  to  reach  the  Indies  by  sailing  around  north 
of  Europe;  others  proceeded  southward  along  the  coast  of 
Africa  hoping  to  reach  the  southern  extremity  of  that 
continent  and  turn  eastward  to  the  land  of  their  desires. 
The  efforts  of  those  who  tried  the  latter  route  were  finally 
crowned  with  success.  In  1486-7  Bartholomew  Diaz,  in 
the  employ  of  the  Portuguese  government,  rounded  the 
southern  coast  of  the  African  continent,  and  in  1497-8 
Vasco  da  Gama,  another  Portuguese  navigator,  made  the 
voyage  around  Africa  to  Calicut.  This  route,  until  the 
Suez  Canal  was  completed  in  1869,  was  the  chief  path  of 
trade  and  travel  between  Western  Europe  and  the  Orient, 
and  it  is  yet  one  of  the  great  trade  routes  of  the  world. 

Christopher  Columbus.  Among  the  experienced  navi- 
gators who  became  interested  in  the  search  for  a  new  route 
to  the  Indies  was  Christopher  Columbus.  He  was  a  native 
of  Genoa,  but  after  the  decline  of  Genoese  power  following 
the  interruption  of  the  Levant  trade  by  the  Turkish  con- 
quests, he  settled  at  Lisbon,  where  his  knowledge  of  navi- 
gation procured  for  him  ready  employment.  He  made 
trips  to  England  and  Iceland,  and  had  some  share  in  the 
voyages  of  exploration  along  the  western  coast  of  Africa. 

His  imag'ination  stirred  by  the  eager  search  for  the 
Indies,  Columbus  conceived  the  plan  of  sailing  directly 
westward  across  the  Atlantic  to  reach  the  much  desired 
country.  In  common  with  other  scientists  of  the  time 
he  believed  the  earth  to  be  spherical.  Ignorant  of  the  fact 
that  two  wide  oceans  and  a  great  body  of  land  lay  be- 
tween western  Europe  and  Asia,  he  was  sure  that  simply 
by  sailing  across  the  Atlantic  he  would  come  to  Japan, 
China  and  the  spice  islands  of  the  East. 

It  was  necessary  for  him  to  get  financial  aid  for  his 


DISCOVERY  AND  EXPLORATION  21 

proposed  expedition.  He  tried  for  several  years  without 
success,  but  fired  with  enthusiasm  and  filled  with  conviction 
that  his  plan  was  practicable  he  would  not  give  up. 
Finally  Ferdinand  and  Isabella  of  Spain  provided  hira 
with  a  fleet  of  three  small  vessels,  and  in  1492  he  made 
his  memorable  voyage  across  the  unknown  Atlantic. 

A  New  World.  Columbus  made  three  more  voyages  but 
he  looked  in  vain  for  the  spice  islands  and  splendid  cities 
of  the  East.  Others  came  to  aid  in  the  search,  but  were 
disappointed,  as  Columbus  had  been.  One  of  the  explorers, 
Americus  Vespucius,  who  touched  the  coast  of  Brazil, 
reported  that  he  had  found  a  "new  world"  and  to  this 
new  world  the  name,  America,  was  given  before  it  was  even 
known  that  the  region  reached  by  Columbus  was  not  the 
East  Indies.  In  1513  Balboa  crossed  the  Isthmus  of 
Panama  and  found  that  another  ocean  lay  beyond  the 
isthmus.  In  1519-21  Magellan  sailed  southward  along 
the  coast  of  South  America,  entered  the  Pacific  Ocean  by 
way  of  the  strait  which  bears  his  name,  and  after  sailing 
northward  for  several  hundred  miles,  turned  west  and 
made  his  way  across  the  wide  body  of  water  which  sepa- 
rates America  from  Asia.  Magellan  was  killed  by  the 
natives  in  the  Philippine  Islands,  but  his  men  succeeded 
in  taking  one  vessel  around  southern  Africa  home  to  Spain, 
completing  the  first  voyage  around  the  globe. 

The  exploit  of  Magellan  proved  definitely  that  Columbus 
had  hit  upon  a  new  world.  For  a  time  this  new  world  was 
regarded  with  disappointment ;  it  was  a  poor  substitute 
for  what  the  people  of  Europe  so  keenly  desired  and 
thought  they  had  found — a  short  route  to  the  rich  Indies. 
Considerable  effort  was  expended  in  seeking  a  waterway 
across  the  new  land;  in  fact  for  more  than  a  century  ex- 
plorers made  their  way  up  American  rivers  flowing  into 
the  Atlantic,  hoping  to  find  a  passage  to  the  Pacific  Ocean. 
It   soon   became    apparent   however   that   the   new   world 


22  DISCOVERY  AND  EXPLORATION 

offered  wonderful  opportunities  for  acquiring  wealth,  and 
when  the  nations  of  Europe  realized  this  fact  they  took 
up  the  task  of  exploring,  conquering  and  colonizing  the 
great  continents  of  the  West.  The  Levant  trade  was  lost, 
but  through  the  loss  Europe  came  into  possession  of  a  com- 
merce much  greater  in  extent  and  value.  The  discovery 
of  the  route  around  Africa  to  the  Indies  made  possible  a 
recovery  and  even  a  greater  development  of  the  Oriental 
trade,  and  America  in  a  short  time  yielded  opportunities 
for  a  trade  of  more  importance  than  the  Levant  com- 
merce could  ever  have  been.  The  center  of  trade  now 
shifted  from  the  Mediterranean  coast  of  Europe  to  the 
Atlantic  coast;  the  front  door  of  Europe  was  on  the  west 
instead  of  on  the  south;  and  the  small  city-republics  of 
Italy  were  replaced  in  commercial  leadership  by  powerful 
western  nations,  Spain,  France  and  England.  The  dis- 
covery of  the  new  world  suddenly  changed  the  course  of 
European  history. 

Appropriation  of  America.  In  taking  possession  of  the 
new  world  the  people  of  Europe  paid  little  heed  to  the 
fact  that  the  vast  territory  belonged,  nominally  at  least, 
to  the  native  Indians.  Pope  Alexander,  in  1493-4  divided 
the  newly  discovered  land  between  Spain  and  Portugal, 
assigning  to  Spain  all  territory  west  of  a  meridian  three 
hundred  and  seventy  leagues  west  of  the  Azores  Islands, 
and  giving  to  Portugal  the  lands  to  the  east  of  the  meridian. 
The  Pope's  assumption  of  authority  to  divide  the  heathen 
world  received  no  more  consideration  however  than  the 
rights  of  the  Indians.  The  monarchs  of  Europe  merely 
assumed  dominion  over  certain  regions,  which  they  claimed 
by  right  of  discovery,  exploration  or  conquest,  and  then 
proceeded  to  sell  the  land  or  give  it  away.  Some  of  those 
who  received  land  made  treaties  with  the  Indian  tribes, 
but  for  the  most  part  the  settlers  were  content  with  titles 
to  ownership  based  ultimately  on  royal  grants.     The  In- 


DISCOVERY  AND  EXPLORATION  23 

dians  in  America  were  not  numerous,  they  had  made  com- 
paratively little  industrial  progress,  and  they  were  unable 
to  withstand  the  white  man's  advance. 

Spanish  Exploration  and  Conquest.  Since  Columbus 
made  the  voyage  of  discovery  on  behalf  of  the  Spanish 
government,  the  Spaniards  had  the  first  opportunity  to  in- 
vestigate the  possibilities  of  the  new  world.  Unfortunately 
for  Spain  the  early  explorers  from  that  country  found 
that  the  natives  of  the  tropical  regions  of  America  pos- 
sessed large  quantities  of  gold  and  silver.  Columbus  found 
some  gold  in  the  island  of  Hayti  and  explorers  who  fol- 
lowed him  heard  tales  of  vast  riches  to  be  had  on  the 
mainland.  In  1519-21  Cortes  conquered  Mexico,  finding 
what  appeared  to  be  an  inexhaustible  supply  of  silver; 
Pizarro  opened  the  way  to  even  greater  treasure  by  his 
treacherous  conquest  of  Peru.  Within  a  brief  period 
Mexico,  Central  America,  the  northern  part  of  South 
America,  and  the  large  islands  of  the  West  Indies  passed 
under  the  control  of  Spain,  and  treasure  vessels  sailed 
across  the  Atlantic  bearing  home  the  ill-gotten  gains  of  the 
plundering  "  conquistadores. " 

The  exploits  of  Cortes  and  Pizarro  served  to  stir  the 
ambitions  of  other  leaders,  several  of  whom  set  out  to 
explore  the  northern  mainland  in  hope  of  finding  other 
sources  of  gold  and  silver.  Hernando  de  Soto,  landing  at 
Tampa  Bay  in  1539,  led  a  large  expedition  northward 
across  the  Mississippi  River,  far  into  the  interior  of  the 
continent.  The  search  for  gold  was  fruitless.  De  Soto 
sickened  and  died  and  the  remnants  of  his  disappointed 
band  struggled  back  to  a  Spanish  settlement  in  Mexico. 
Another  Spaniard,  Coronado,  made  his  way  from  Mexico 
northward  and  eastward  through  what  is  now  Arizona, 
JNew  Mexico,  Texas,  Oklahoma  and  Kansas,  but  he  never 
came  to  the  rich  and  wonderful  cities  which  he  expected 
to  find.     Other  Spanish  explorers  made  similar  journeys, 


24  DISCOVERY  AND  EXPLORATION 

but  their  labors  were  barren  of  results.  In  1565  the 
Spaniards  established  a  military  post  at  St.  Augustine, 
Florida,  driving  away  or  killing  a  few  French  Huguenots 
who  were  endeavoring  to  plant  a  settlement.  Spain  re- 
tained possession  of  Florida  until  1763  when  the  province 
was  ceded  to  Great  Britain.  It  was  returned  to  Spain  in 
1783  and  remained  a  Spanish  possession  until  purchased 
by  the  United  States  in  1819.  Florida  was  the  only  part 
of  the  Atlantic  coast  of  what  later  became  the  United 
States,  over  which  the  Spaniards  established  control,  though 
they  claimed  the  entire  coast  of  North  America,  and  on 
several  occasions  threatened  to  serve  the  English  in  Vir- 
ginia as  they  had  served  the  French  Hugenots  at  St.  Augus- 
tine. Spanish  settlements  were  founded  in  the  Southwest, 
and  from  1763  to  1800  Spain  had  possession  of  the  great 
Louisiana  territory,  which  was  originally  appropriated  by 
the  French. 

French  Claims  in  America.  While  the  Spaniards  were 
seizing  control  of  the  tropical  regions  of  America  the 
French  were  exploring  the  regions  farther  north.  Like  the 
Spaniards,  the  French  were  looking  for  directly  available 
wealth,  and  they  had  but  little  interest  in  cultivating  the 
soil  and  in  establishing  towns  and  cities.  The  product 
which  first  attracted  their  attention  was  the  inexhaustible 
supply  of  fish  on  the  Newfoundland  banks  and  in  the  Gulf 
of  St.  Lawrence.  Fish  were  in  great  demand  in  Europe, 
the  eating  of  meat  on  Fridays,  Saturdays  and  during  Lent 
being  strictly  forbidden.  The  discovery  of  the  great  fish- 
ery resources  of  America  was  highly  welcome,  and  fisher- 
men from  all  countries  of  western  Europe  came  to  the  new 
grounds.  The  fishermen  of  France  were  first,  and  for 
nearly  a  century  the  French  fishing  fleet  in  America  was 
larger  than  the  fleets  of  other  countries  combined. 

In  1535  Jacques  Cartier  ascended  the  St.  Lawrence 
River  as  far  as  Montreal,   establishing  the   dominion   of 


DISCOVERY  AND  EXPLORATION  25 

France  in  Canada.  Subsequent  explorers  followed  the  St. 
Lawrence  to  its  source  and  discovered  the  Great  Lakes. 
Others  pushed  on  to  the  valley  of  the  Mississippi  River 
and  in  1682  the  adventurous  La  Salle  reached  the  mouth 
of  that  stream.  In  their  occupation  of  the  land  the  French 
directed  their  efforts  for  the  most  part  to  the  development 
of  the  fur  trade.  The  waterways  of  the  St.  Lawrence  and 
Mississippi  systems  made  penetration  of  the  interior  rela- 
tively easy.  Small  trading  posts  were  established  at 
dozens  of  points  in  the  Mississippi  Valley,  near  the  best 
hunting  grounds.  But  while  the  French  came  into  pos- 
session of  a  vast  stretch  of  territory  they  did  little  real 
work  of  colonization.  Except  in  Canada,  where  some  ef- 
fort was  made  to  develop  agricultural  resources,  the  French 
population  in  America  was  widely  scattered  and  made 
little  industrial  progress. 

Early  English  Possessions  in  America.  Five  years  after 
Columbus's  discovery,  John  Cabot,  an  Italian  navigator, 
made  a  voyage  to  America  in  the  interest  of  Henry  VII  of 
England.  Cabot  is  credited  with  the  discovery  of  the  main- 
land of  North  America,  but  there  is  much  doubt  as  to  the 
place  where  he  landed.  Though  the  discovery  gave  to 
England  a  right  in  America  equal  to  that  of  either  France 
or  Spain,  this  right  was  not  claimed  for  nearly  a  century. 
England  was  passing  through  a  number  of  political  and 
religious  disturbances  which  for  a  time  prevented  any 
attempt  to  follow  up  the  work  done  by  Cabot. 

In  the  latter  part  of  the  sixteenth  century  English  in- 
terest in  America  was  reawakened.  The  revival  of  interest 
was  due  primarily  to  the  exploits  of  the  great  English 
mariners,  Sir  John  Hawkins  and  Sir  Francis  Drake. 
Hawkins  started  out  as  a  slave  trader,  carrying  negroes 
from  Africa  to  the  West  Indies  and  IMexico  for  sale  to 
the  Spanish  settlers.  In  1568  Hawkins'  small  fleet  was 
treacherously  attacked  by  the  Spaniards  in  the  harbor  of 


26  DISCOVERY  AND  EXPLORATION 

Vera  Cruz,  many  of  his  men  being  killed  or  captured  and 
a  number  of  his  vessels  destroyed.  Among  those  who  es- 
caped with  Hawkins  was  young  Francis  Drake,  and  these 
two,  for  the  rest  of  their  lives,  devoted  themselves  to 
"getting  even"  with  the  Spaniards,  They  organized  ex- 
peditions to  pillage  the  rich  towns  along  the  coast  of  the 
Spanish  possessions;  they  captured  Spanish  treasure  ships 
with  their  cargoes  of  gold,  silver  and  precious  jewels. 
This  profitable  ''employment"  attracted  many  other 
English  mariners,  who  led  expeditions  to  the  Spanish 
Main  in  search  of  spoil  and  thrilling  adventure.  In  1578 
Drake  sailed  up  the  western  coast  of  South  America  plun- 
dering Spanish  towns  and  treasure  ships,  and  went  home 
across  the  Pacific  and  Indian  Oceans,  the  first  Englishman 
to  make  a  voyage  around  the  world. 

While  Hawkins,  Drake  and  others  were  robbing  the 
Spaniards,  other  Englishmen  became  interested  in  America 
as  a  place  for  colonization.  In  1578  Sir  Humphrey  Gil- 
bert received  from  Queen  Elizabeth  a  charter  authorizing 
him  to  discover  such  remote  lands  as  were  not  possessed 
by  any  Christian  prince  and  to  occupy  and  hold  such  ter- 
ritory "with  all  commodities,  jurisdictions  and  royalties 
by  sea  and  land."  In  1583  Gilbert  crossed  the  Atlantic 
with  four  vessels  and  took  possession  of  Newfoundland  and 
all  surrounding  lands  within  the  distance  of  200  leagues. 
On  the  return  voyage  to  England  the  vessel  on  which 
Gilbert  sailed  was  lost  with  all  on  board.  His  expedition 
gave  England  a  claim  to  Newfoundland,  though  no  effort 
was  made  to  occupy  the  island  until  many  years  later. 

Gilbert's  charter  passed  by  inheritance  to  his  brother, 
Adrian  Gilbert,  and  his  half  brother  Walter  Raleigh.  In 
1584  Queen  Elizabeth  gave  a  second  charter  to  Raleigh 
granting  to  him  all  the  powers  which  she  had  previously 
given  to  Gilbert.  Raleigh  immediately  sent  an  expedition 
to  America.     His  men  entered  Pamlico  Sound,  and  after 


DISCOVERY  AND  EXPLORATION  27 

exploring  the  country  for  a  couple  of  months,  returned 
with  enthusiastic  accounts  of  its  beauty  and  fertility.  The 
new  land  was  named  Virginia  in  honor  of  Elizabeth,  and 
she  conferred  knighthood  upon  Raleigh  as  a  reward  for 
his  enterprise.  Raleigh  tried  to  establish  a  colony  in  Vir- 
ginia but  did  not  succeed,  and  for  a  time  English  efforts  to 
occupy  any  part  of  America  came  to  an  end. 

Early  in  the  seventeenth  century  the  project  of  English 
colonization  of  America  was  revived.  King  James  I,  in- 
stead of  granting  a  charter  authorizing  the  settlement  of 
lands  **not  possessed  by  any  Christian  prince,"  merely  laid 
claim  to  that  part  of  America  lying  between  the  thirty- 
fourth  and  forty-fifth  parallels  of  north  latitude,  and  au- 
thorized certain  of  his  subjects  to  make  settlements  in  that 
region.  The  Spanish  government  opposed  James's  claims 
but  to  no  avail.  He  proceeded  to  make  grants  of  land  in 
the  region  over  which  he  assumed  control,  and  it  was  in 
this  region  that  the  first  English  colonies  in  America  were 
established. 

Netherlands  and  Sweden.  King  James's  mere  assertion 
that  he  owned  that  part  of  America  between  the  thirty- 
fourth  and  forty-fifth  parallels  did  not  make  it  any  truer 
than  the  Pope's  assertion  that  the  new  world  belonged  to 
Spain  and  Portugal.  The  Dutch  nation,  like  the  other 
commercial  nations  of  Europe,  desired  to  secure  a  share 
of  America.  In  1609  the  Dutch  East  India  Company  em- 
ployed Henry  Hudson,  an  English  navigator,  to  search  for 
a  short  western  route  to  the  Indies.  Hudson  entered 
New  York  Bay  and  sailed  up  the  river  which  bears  his 
name,  passing  the  present  site  of  Albany.  Fourteen  years 
later  a  Dutch  colony  was  established  on  ^Manhattan  Island. 
The  Netherlands  claimed  dominion  over  the  territory  ex- 
tending from  the  Connecticut  River  to  the  Delaware. 

Disregarding  the  Dutch  claims  to  the  Delaware  River  a 
company  of  Swedes  founded  a  colony  of  New  Sweden  in 


28 


DISCOVERY  AND  EXPLORATION 


1638,  building  their  fort  on  the  site  of  the  present  city  of 
Wilmington.  Thus  five  nations  of  Europe  appropriated 
and  occupied  portions  of  the  territory  now  included  in  the 
United  States. 

The  Struggle  for  Control.     The  methods  employed  by 
European  nations  in  appropriating  American  lands  inevi- 


North  America  in  1713 

tably  led  to  conflicting  territorial  claims,  and  violent  quar- 
rels among  rival  claimants  soon  arose.  In  1655  the  Dutch 
attacked  the  Swedish  settlements  on  the  Delaware,  and 
Sweden's  political  power  in  America  came  to  an  end. 
New  Netherlands  did  not  long  survive  New  Sweden.     The 


DISCOVERY  AND  EXPLORATION  29 

river  valleys  controlled  by  the  Dutch  were  claimed  by  the 
English.  In  1654  the  Dutch  were  deprived  of  the  fort 
which  they  had  built  on  the  Connecticut  River  where  the 
city  of  Hartford  now  stands.  Ten  years  later  Charles  II 
of  England  made  a  grant  of  American  lands  to  his  brother 
James,  the  Duke  of  York,  the  grant  including  the  entire 
region  occupied  by  the  Dutch.  James  at  once  sent  a  fleet 
to  take  possession  of  New  Netherlands.  A  Dutch  naval 
squadron  recovered  the  colony  in  1673,  but  the  following 
year  it  was  restored  to  English  rule. 

The  contest  between  England  and  France  was  of  longer 
duration.  On  several  occasions  in  the  seventeenth  century 
there  were  disputes  concerning  the  boundary  line  between 
the  English  possessions  and  the  French  colonies  to  the 
north,  and  armed  clashes  were  not  infrequent.  Though 
Newfoundland  was  nominally  an  English  colony  by  virtue 
of  Sir  Humphrey  Gilbert's  declaration  in  1583,  and  later 
by  right  of  occupation,  the  southwestern  shores  of  the 
island  were  settled  by  the  French  after  1660.  In  1690 
the  English  seized  Nova  Scotia  (Acadia),  but  in  the 
treaty  of  Ryswiek,  signed  in  1697,  England  restored  Nova 
Scotia  to  France  and  recognized  the  French  claims  to  a 
part  of  Newfoundland.  At  the  end  of  Queen  Anne's  War 
in  1713  the  treaty  of  Utrecht  gave  both  Nova  Scotia  and 
Newfoundland  to  England,  leaving  France  in  control  of 
Cape  Breton  Island  and  the  valleys  of  the  St.  Lawrence 
and  Mississippi.  During  King  George's  War  (1744^-48) 
the  English  captured  Louisbourg,  the  French  fortress  on 
Cape  Breton  Island,  but  the  treaty  left  territorial  claims  as 
they  had  been  before  the  war. 

In  their  occupation  of  the  INIississippi  Valley  the  French 
eventually  established  a  fort  at  the  source  of  the  Ohio 
River,  thereby  encroaching  on  land  which  the  English 
claimed  to  be  a  part  of  Virginia.  The  French  likewise 
began   to   occupy  the   valley   of   Lake    Champlain.     War 


30 


DISCOVERY  AND  EXPLORATION 


between  the  rival  colonists  broke  out  in  1754  and  con- 
tinued for  nine  years,  the  English  winning  a  complete 
victory.  By  the  treaty  of  1763  France  surrendered  to 
England  the  eastern  half  of  the  Mississippi  Valley  and  all 
her  northern  possessions  except  the  two  small  islands  of 
Miquelon  and  St.  Pierre.     Louisiana  was  ceded  to  Spain, 


pB:V^  Unexplored 
I 1  Spanish 


North  America  in  17G3 

and  French  dominion  on  the  American  continent  was 
ended,  except  for  the  brief  period  during  which  Napoleon 
had  control  of  Louisiana  (1800-1803). 

The  boundary  between  the  English  possessions  on  the 
Atlantic  coast  and  the  Spanish  province  of  Florida  was 


DISCOVERY  AND  EXPLORATION  31 

for  many  years  a  matter  of  dispute.  The  original  claim 
of  King  James  I  to  American  land  was  gradually  expanded, 
and  when  Georgia  was  settled  in  1733  the  English  took  up 
additional  territory  which  was  claimed  by  Spain.  In  1763 
Florida  was  ceded  to  England  and  the  boundary  disputes 
of  the  colonial  period  of  American  history  were  ended,  leav- 
ing England  in  possession  of  all  the  populated  regions  of 
what  was  later  to  be  the  United  States,  except  the  thinly 
settled  territory  of  the  lower  Mississippi  Valley  and  the 
Spanish  posts  in  the  Southwest. 

Advantages  of  English  Control.  That  the  English  gov- 
ernment was  able  to  maintain  and  extend  its  sphere  of 
influence  on  the  Atlantic  coast  of  North  America  was  of 
great  advantage  to  the  colonists  who  settled  there. 
Though  the  English  colonial  policy  was  not  as  liberal  as 
it  might  have  been,  it  was  far  more  liberal  and  progres- 
sive than  the  colonial  policies  of  the  other  European  gov- 
ernments which  appropriated  parts  of  America.  The 
Dutch  colonists  of  New  Netherlands  welcomed  the  change 
from  Dutch  to  English  rule.  England  gave  her  colonists 
a  much  greater  measure  of  political  freedom  than  the  other 
European  countries  permitted.  England  did  not  endeavor 
to  force  any  particular  religious  belief  on  the  settlers  who 
occupied  her  colonial  lands.  Though  religious  persecution 
occurred  in  some  English  colonies  it  was  due  to  the 
domestic  policy  of  the  colonies,  and  the  English  govern- 
ment had  no  part  in  it.  There  were  always  places  in  the 
English  dominions  in  America  where  people  could  enjoy 
complete  freedom  of  religion,  and  thousands  of  non- 
English  people  came  to  the  English  colonies  in  America 
for  the  purpose  of  securing  religious  liberty.  Finally 
England  permitted  much  freedom  in  the  industrial  and 
commercial  development  of  her  colonies.  The  liberal  policy 
of  England  contributed  largely  to  the  welfare  of  her  sub- 
jects in  America  and  enabled  them  to  prosper  to  a  much 


32  DISCOVERY  AND  EXPLORATION 

greater  degree  than  would  have  been  possible  had  some 
other  nation  acquired  control. 

Questions  and  Topics 

1.  Was  the  discovery  of  America  more  important  to  the 
world  in  the  sixteenth  and  seventeenth  centuries  scientifi- 
cally or  commercially? 

2.  Compare  the  motives  for  seeking  the  North  and  South 
Poles  with  those  of  the  explorers  who  sought  the  New 
World. 

3.  What  other  English  commercial  venture  resulted  in  a 
great  empire? 

4.  Was  there  any  connection  between  the  products  sought 
for  by  France  and  Spain,  and  their  downfall  in  the  New 
World? 

5.  What  nations  of  Europe  did  not  attempt  coloniza- 
tion ?    Why  ? 

6.  Write  a  short  biography  of  Columbus. 


CHAPTER  III 
COLONIZATION 

Motives  for  Colonization.  The  chief  motive  which  led 
to  the  settlement  of  America  was  the  desire  to  acquire 
wealth  by  developing  the  natural  resources  of  the  continent 
and  by  building  up  commerce.  Europeans  thought  that 
America  would  furnish  many  articles  which  could  be 
readily  used  in  Europe,  and  that  American  colonies  would 
provide  a  market  in  which  the  products  of  European  in- 
dustry could  be  profitably  sold.  The  motives  of  the  in- 
dividual settlers  who  came  across  the  Atlantic  differed 
widely.  Some  came  in  order  to  escape  religious  persecu- 
tion, some  came  on  account  of  political  troubles  in  their 
native  countries,  many  came  merely  in  search  of  adven- 
ture. But  the  great  majority  of  the  emigrants  came  for 
the  purpose  of  improving  their  economic  conditions. 
America  has  been  from  the  beginning  a  land  of  promise  to 
the  poor,  and  among  the  millions  who  have  landed  on  her 
hospitable  shores  the  poor  have  far  outnumbered  the  op- 
pressed. 

Conditions  in  England  Favored  Colonization.  Condi- 
tions in  England  during  the  seventeenth  century  were 
peculiarly  favorable  to  schemes  of  American  colonization. 
During  the  preceding  century  there  had  been  a  steady 
growth  of  English  commerce  and  industry.  Great  prog- 
ress had  been  made  in  manufactures,  particularly  in  the 
manufacture  of  woolen  cloth.  English  merchants  had  ac- 
quired a  substantial  share  in  the  new  commerce  which 
grew  up  between  Europe  and  the  regions  of  the  world 
discovered  after  the  destruction  of  the  Levant  trade.     A 

33 


34  COLONIZATION 

number  of  trading  companies  were  organized  in  England 
during  the  latter  part  of  the  sixteenth  century,  and  to  these 
companies  the  government  gave  special  privileges  to  carry 
on  trade  with  Russia,  the  Baltic  regions,  Africa  and  the 
Indies.  The  profits  from  this  trade,  and  from  industrial 
enterprises,  afforded  the  capital  funds  necessary  to  carry 
out  projects  of  American  colonization. 

Though  industry  and  commerce  were  more  active  in 
England  than  ever  before  there  was  nevertheless  a  large 
number  of  people  who  were  out  of  work.  This  was  partly 
due  to  the  fact  that  a  large  quantity  of  agricultural  land 
was  converted  into  pasture  for  sheep,  and  the  displaced 
farm  laborers  could  not  readily  find  new  employment.  An- 
other reason  for  the  existence  of  a  surplus  population  was 
the  unusual  infrequency  of  epidemics  of  the  plague,  which 
during  previous  times  had,  with  much  regularitj^  caused 
the  death  of  a  considerable  portion  of  the  English  people. 
One  Englishman  wrote  in  1583:  "It  hath  pleased  God  in 
his  great  goodnesse,  of  long  time  to  hold  his  merciful  hand 
over  this  real  me,  in  preserving  the  people  of  the  same,  both 
from  slaughter  by  the  sword,  and  great  death  by  plague, 
pestilence,  or  otherwise,  that  there  are  at  this  day  many 
which  live  in  such  penurie  and  want,  as  they  could  be 
contented  to  hazard  their  lives,  and  to  serve  one  yeere  for 
meat,  drinke  and  apparell  only,  without  wages,  in  hope 
thereby  to  amend  their  estates."  He  said  that  coloniza- 
tion would  be  "of  generall  benefit  unto  our  countrey,  that 
through  this  occasion,  not  onely  a  great  number  of  men 
which  do  now  live  idlely  at  home,  and  are  burthenous, 
chargeable  and  unprofitable  to  this  realme,  shall  hereby 
be  set  on  workc,  but  also  children  of  twelve  or  fourteene 
yeeres  of  age,  or  under,  may  be  kept  from  idlenesse." 
During  the  twenty  years  following  1583  the  number  of 
idle  people  increased  rather  than  diminished.  The  con- 
elusion  of  a  treaty  of  peace  with  Spain  in  1604  liberated  a 


COLONIZATION  35 

large  body  of  men  from  military  service  and  added  further 
to  the  number  who  were  willing  to  go  to  the  new  world  in 
hope  of  bettering  their  fortunes. 

Another  circumstance  which  favored  emigration  to 
America  in  the  seventeenth  century  was  the  disturbed 
political  conditions  in  England.  During  the  quarrel  be- 
tween the  Puritan  party  and  King  Charles  I  many  Puri- 
tans left  their  native  country  to  avoid  the  oppressive 
measures  of  the  king.  The  revolution  which  resulted  in 
the  execution  of  King  Charles  in  1649  drove  many  sup- 
porters of  the  king  to  America.  When  Charles  II  re- 
turned to  England  in  1660  to  occupy  the  throne  many 
opponents  of  the  monarchy  found  it  necessary  to  emigrate. 
The  revolution  of  1688-89  caused  another  exodus. 

Colonization  a  Difficult  Undertaking.  Notwithstanding 
the  availability  of  capital  and  labor  for  colonial  enterprises 
the  actual  founding  of  the  first  permanent  English  settle- 
ments was  a  work  of  great  difficulty.  However  eager  peo- 
ple might  be  to  escape  bad  conditions  in  Europe,  emigra- 
tion to  the  American  wilderness  held  promise  of  priva- 
tion and  danger  which  only  the  most  hardy  and  courageous 
could  hope  to  survive.  In  order  to  succeed  a  colony  had 
to  have  strong,  capable  leaders,  and  settlers  willing  to  en- 
dure great  toil  and  hardship.  ]\Iany  attempts  to  plant 
colonies  failed  because  the  settlers  lacked  industry,  en- 
durance and  perseverance. 

Colonization  was  highly  expensive.  A  large  initial  in- 
vestment was  required  to  purchase  equipment  and  to  pay 
for  transporting  the  colonists  and  their  goods  across  the 
ocean.  After  a  settlement  was  founded  it  was  necessary 
to  maintain  for  a  considerable  period  of  time  a  continuous 
flow  of  food,  clothing,  tools  and  other  supplies.  Usually 
several  years  passed  before  the  colony  produced  enough  to 
pay  for  these  current  supplies,  and  the  return  on  the 
original  investment  was  long  deferred.     ]Many  of  the  early 


36  COLONIZATION 

colonies  were  financed  by  investors  who  remained  in 
Europe.  Not  only  did  these  investors  fail  to  obtain  the 
immediate  profit  which  they  hoped  for,  but  they  were 
called  upon  to  supply  additional  money  to  support  the 
colony  during  the  early  years  of  its  existence.  When  the 
investors  refused  to  "send  good  money  after  bad,"  and 
when  the  colonists  themselves  did  not  have  sufficient  money 
or  credit  to  last  them  through  the  pioneering  period,  the 
enterprise  had  to  be  abandoned.  Once  a  colony  was  firmly 
established  and  productive  work  well  started  it  usually 
grew  rapidly  in  population  and  wealth.  The  people  not 
only  became  self-sustaining  but  accumulated  a  surplus  with 
which  further  development  work  could  be  carried  on.  The 
early  days  of  a  new  colony  were  the  hardest  days. 

Raleigh's  Failure.  Sir  Walter  Kaleigh,  the  first 
Englishman  to  undertake  the  colonization  of  America,  sent 
a  number  of  men  to  Roanoke  Island  in  1585,  but  they  soon 
became  discouraged  and  returned  to  England  without  wait- 
ing for  the  supply  ships  which  Raleigh  sent  out  the  fol- 
lowing year.  Two  years  later  Raleigh  made  a  second 
effort  to  plant  a  colony  in  his  Virginia  grant,  despatching 
three  vessels  with  men,  women  and  children.  This  attempt 
would  probably  have  succeeded  had  it  not  been  for  the  out- 
break of  war  between  England  and  Spain.  The  governor 
of  the  colony,  John  White,  returned  to  England  with  the 
three  ships  for  the  purpose  of  getting  needed  supplies. 
Because  of  the  war  he  could  not  go  back  to  America  until 
1591.  When  he  finally  reached  Roanoke  Island  the  little 
band  of  settlers  had  deserted  the  place  where  he  had  left 
them  more  than  three  years  before.  He  sailed  for  England 
without  learning  what  had  become  of  them.  Raleigh  had 
lost  about  forty  thousand  pounds  and  had  failed  to  accom- 
plish his  purpose.  In  order  to  secure  money  he  organized 
a  trading  company  to  which  he  assigned  his  charter,  but 
he  found  it  impossible  to  send  out  another  colonizing  ex- 


COLONIZATION 


37 


pedition.  His  charter  was  forfeited  in  1604  when  he  was 
thrown  into  prison  on  charges  of  treason.  Some  of  his 
associates  helped  organize  another  company  which  received 
a  charter  from  King  James  in  1606.  This  company,  the 
"Virginia  Company,"  was  the  agency  by  which  the  first 
permanent  English  colony  was  planted  in  America. 
Though  Raleigh  failed,  he  showed  the  way  for  colonization, 
and  his  prophecy  that  he  would  live  to  see  an  "English 
nation  established  in  America"  was  fulfilled. 

The  Virginia  Company. 
The  first  Virginia  Com- 
pany really  consisted  of 
two  companies,  though 
there  was  but  one  char- 
ter. The  chief  stockhold- 
ers lived  in  the  English 
cities,  London  and  Ply- 
mouth, and  the  organ- 
izers were  called  the  Lon- 
don and  the  Plymouth 
Companies.  The  former 
was  given  the  exclusive 
right  to  establish  a  col- 
ony or  "plantation"  at 
any  point  on  the  Ameri- 
can coast  between  the 
thirty-fourth  and  thirty-eighth  parallels  of  north  latitude, 
while  the  latter  had  exclusive  rights  of  settlement  between 
the  forty-first  and  forty-fifth  parallels.  Both  companies 
were  given  permission  to  settle  between  the  thirty-eighth 
and  forty-first  parallels,  but  it  was  stipulated  that  one  com- 
pany should  not  establish  a  settlement  within  one  hundred 
miles  of  a  settlement  founded  by  the  other.  Each  company 
was  to  have  ten  thousand  square  miles  of  land,  a  tract  ex- 
tending fifty  miles  north  and  south  and  one  hundred  miles 


Sir  Walter  Ealeigh 


38 


COLONIZATION 


inland  from  its  first  settlement.  The  charter  also  gave 
the  companies  the  authority  necessary  for  governing  their 
colonies. 

The  first  settlement  made  under  this  charter  was  that 
of  Jamestown,  Virginia,  founded  by  the  London  Company 
in  May,  1607.  The  colony  was  simply  a  commercial  ven- 
ture. The  settlers  were  to  labor  on  the  Company's  land, 
putting  all  products  into  a  common  storehouse  for  the 


John  Smith 

benefit  alike  of  settlers  and  stockholders.  Trade  was  to 
be  carried  on  by  the  Company  as  a  whole,  and  not  by  in- 
dividual colonists. 

The  hopes  of  the  stockholders  for  immediate  profit  were 
not  realized.  The  colonists  were  for  the  most  part  penni- 
less "  gentlemen"  who  were  not  accustomed  to  work.  In- 
stead of  trying  to  cultivate  the  fertile  soil  they  spent  much 
of  the  summer  in  a  vain  effort  to  find  gold.     Their  sup- 


COLONIZATION  39 

ply  of  provisions  soon  ran  low  and  many  fell  sick  and 
died  of  malaria.  The  Company  sent  over  fresh  supplies 
and  additional  settlers  early  in  the  following  year,  and 
under  the  vigorous  leadership  of  Captain  John  Smith, 
whose  simple  but  effective  rule  was  "he  that  will  not 
work  shall  not  eat,"  the  colony  managed  to  exist.  Still 
no  profits  were  forthcoming  and  it  was  necessary  in  1609 
for  the  London  investors  to  reorganize  in  order  to  get  ad- 
ditional capital.  King  James  gave  the  London  Company 
a  new  charter  greatly  extending  its  grant  of  land  and  con- 
ferring additional  powers  of  government.  In  spite  of  the 
aid  which  the  new  organization  gave  the  colony,  condi- 
tions at  Jamestown  became  so  bad,  especially  after  the  de- 
parture of  Captain  John  Smith  in  October,  1609,  that  the 
settlers  gave  up  in  despair  and  agreed  to  return  to  Eng- 
land. Just  as  they  were  departing  a  number  of  ships  ar- 
rived bringing  more  provisions  and  settlers,  and  it  was 
decided  that  they  should  try  again.  Though  conditions 
remained  unsatisfactory  for  some  time,  hard  work  and 
capable  leadership  eventually  triumphed,  and  the  "Eng- 
lish nation  in  America"  was  established. 

The  London  Company  did  not  succeed  however  as  a 
commercial  enterprise.  It  was  soon  found  necessary  to 
abandon  the  original  plan  of  common  ownership.  The 
Company  likewise  gave  up  its  monopoly  of  trade,  and 
though  it  continued  to  carry  on  some  commerce  with  the 
colonists  it  was  chiefly  a  land-holding  and  governing  or- 
ganization. Even  in  this  capacity  its  existence  was  brief 
as  its  charter  was  taken  away  in  1624,  and  Virginia  be- 
came a  "royal  province"  controlled  directly  by  the  king. 
Some  of  the  stockholders  of  the  Company  recovered  part 
of  their  investment  by  taking  tracts  of  land  in  Virginia, 
but  for  most  of  the  investors  the  colony  was  a  disastrous 
failure  as  a  business  enterprise. 

Colonization  by  Other   Commercial  Companies.    Sev- 


40  COLONIZATION 

eral  more  colonies  were  established  in  America  by  com- 
panies organized  primarily  for  commercial  purposes  but, 
like  the  London  Company,  these  corporations  were  soon 
transformed  into  landholding  or  political  organizations 
with  virtually  no  trading  functions. 

The  Plymouth  Company,  which  was  chartered  with  the 
London  Company  in  1606,  endeavored  to  plant  a  colony 
at  the  mouth  of  the  Kennebec  River  about  the  same  time 
that  Jamestown  was  settled,  but  the  death  of  the  leading 
English  promoters  deprived  the  settlers  of  the  needed 
financial  support  and  they  were  compelled  to  return  to 
England.  In  1620  the  chief  shareholders  of  the  Plymouth 
Company  obtained  a  new  charter,  with  a  grant  of  land  in 
America  between  the  fortieth  and  forty-eighth  degrees 
of  latitude.  The  new  company,  which  was  known  as  the 
Council  for  New  England,  made  little  effort  to  establish 
settlements  at  its  own  expense,  and  limited  its  activities 
almost  entirely  to  selling  land  to  other  companies  and  to 
individuals  who  desired  to  undertake  the  work  of  coloniza- 
tion. 

In  1620  the  Pilgrims  came  to  America,  landing  at  Ply- 
mouth harbor  late  in  December.  Though  the  chief  motive 
of  the  Pilgrims  in  coming  to  the  new  world  was  the  de- 
sire for  religious  freedom,  the  colonj^  was  nevertheless  a 
commercial  enterprise.  In  association  with  a  group  of 
English  merchants  the  Pilgrims  formed  a  joint  stock 
partnership,  the  shares  of  which  were  valued  at  ten  pounds 
each.  Most  of  the  money  for  the  voyage  to  America  was 
supplied  by  the  merchants  in  return  for  shares.  The 
settlers  were  able  to  buy  a  few  shares,  and  eaoh  adult  emi- 
grant was  entitled  to  one  share  without  pay,  while  each 
child  between  ten  and  sixteen  years  of  age  counted  for  a 
half  share.  All  the  products  of  the  colonists'  labor  were 
to  be  common  property  for  seven  years,  at  the  end  of 
which  time  there  was  to  be  a  division  of  assets  among  the 


COLONIZATION  41 

shareholders,  each  receiving  an  amount  proportioned  to 
his  number  of  shares.  The  Pilgrims  started  for  America 
with  the  intention  of  making  their  new  home  on  the  land 
belonging  to  the  London  Company.  After  deciding  to  re- 
main at  Plymouth  they  secured  a  grant  of  land  from  the 
Council  for  New  England.  The  hardships  of  the  Plymouth 
colony  during  the  early  period  of  its  existence  were  similar 
to  the  hardships  of  the  Jamestown  settlers.  After  a  few 
years  however  the  colony  was  firmly  established  and  be- 
fore the  time  arrived  for  a  division  of  property  they  were 
able  to  borrow  money  and  buy  out  the  stockholders  in  Eng- 
land. As  soon  as  the  borrowed  money  was  repaid  the 
colony  lost  all  appearance  of  a  commercial  organization. 
In  1628  a  small  group  of  English  Puritans  obtained 
from  the  Council  for  New  England  a  tract  of  land  extend- 
ing from  a  point  three  miles  south  of  the  Charles  River 
to  a  point  three  miles  north  of  the  Merrimac.  A  few  set- 
tlers were  sent  to  Salem,  where  a  small  colony  had  already 
been  established  through  the  efforts  of  some  merchants  of 
Dorchester,  England.  In  1629  the  promoters  joined  with 
other  influential  Puritans  and  organized  a  trading  com- 
pany. Under  the  name  of  the  ' '  Governor  and  Company  of 
Massachusetts  Bay  in  New  England"  they  obtained  from 
King  Charles  I  a  charter  which  confirmed  their  grant  of 
land  and  gave  them  powers  of  government.  The  follow- 
ing year  the  Company  transferred  its  seat  of  authority 
from  England  to  Massachusetts,  establishing  its  chief  set- 
tlement at  Boston.  Giving  up  its  commercial  functions 
the  Company  became  merely  the  governing  organization 
of  the  colony.  Thus  was  founded  INIassachusetts,  the  most 
important  colony  of  New  England.  The  wealth  and  in- 
fluence of  Governor  John  Winthrop  and  other  leading 
members  of  the  Company  made  the  success  of  the  colony 
certain  from  the  beginning,  and  Massachusetts  quickly  be- 
came populous  and  wealthy.     Emigrants  from  Massachu- 


42  COLONIZATION 

setts,  some  driven  away  because  of  religious  differences 
with  the  authorities  of  the  Bay  colony,  and  others  leav- 
ing to  seek  better  opportunities,  planted  the  first  settle- 
ments of  Rhode  Island  and  Connecticut. 

In  addition  to  Virginia  and  Massachusetts,  New  Nether- 
lands and  New  Sweden  owed  their  origin  directly  to  com- 
mercial companies,  the  former  being  planted  by  the  Dutch 
West  India  Company  and  the  latter  by  the  South  Company 
of  Sweden.  Many  settlers  were  sent  to  America  by  various 
commercial  companies  to  undertake  development  of  the 
fishing,  lumbering  and  other  resources  of  the  colonies. 
The  trading  companies  were  highly  important  colonizing 
agencies,  and  without  their  aid  America  would  probably 
not  have  been  settled  so  soon.  The  planting  of  the  first 
colonies  was  too  expensive  to  be  accomplished  by  indivi- 
duals acting  alone;  the  corporation  offered  a  means  by 
which  a  large  number  of  individuals  could  unite  in  using 
their  capital  for  a  common  purpose.  Once  a  few  colonies 
were  started  and  the  processes  of  industry  and  commerce 
in  the  new  world  well  organized  the  problem  of  settling 
additional  territory  became  much  less  difficult.  The  set- 
tler could  come  to  America  with  nothing  and  live  tem- 
porarily upon  the  surplus  wealth  of  those  already  here. 

Proprietary  Colonies.  A  number  of  colonies  in  America 
were  established  on  land  granted  to  individuals,  though 
it  was  seldom  that  the  owners  of  such  grants  bore  the 
initial  expense  of  colonization.  Among  the  earliest  of  the 
proprietary  colonies  was  New  Hampshire,  which  was  part 
of  a  grant  obtained  in  1622  from  the  Council  for  New 
England  by  Sir  Ferdinando  Gorges  and  John  I\Iason,  and 
later  divided  between  them,  Mason  receiving  New  Hamp- 
shire and  Gorges  the  province  of  IVlaine. 

In  1632  George  Calvert,  Lord  Baltimore,  a  Catholic 
nobleman  of  England,  received  from  Charles  I  a  grant 
of  land  north  of  the  Potomac  River.     He  died  almost  at 


COLONIZATION  43 

the  time  of  obtaining  his  charter,  and  his  son  Cecil  be- 
came the  Lord  Proprietor  of  Maryland,  as  the  grant  had 
been  named.  In  1633  Cecil  sent  his  brother  and  two  hun- 
dred colonists  to  Maryland,  a  large  part  of  the  expense 
for  supplies  being  borne  by  the  proprietor  himself.  Com- 
plete religious  freedom  was  permitted,  and  under  Calvert's 
liberal  rule  a  prosperous  colony  was  quickly  developed. 

The  chief  period  of  the  establishment  of  proprietary 
colonies  came  after  the  restoration  of  Charles  II  to  the 
English  throne  in  1660.  Charles  desired  to  reward  the 
men  who  had  aided  him  in  recovering  his  kingdom,  and 
since  he  had  little  money,  he  adopted  the  plan  of  pre- 
senting his  supporters  with  large  tracts  of  land  in  America. 
His  first  grant  was  Carolina,  which  he  ga,ve  in  1663  to  a 
group  of  friends,  chief  among  whom  were  the  Duke  of 
Albemarle  and  the  Earls  of  Clarendon  and  Shaftesbury. 
Though  these  men  did  not  undertake  to  finance  the  work 
of  colonization  they  made  attractive  offers  of  land  and 
privileges  to  emigrants  who  would  settle  on  their  domain. 
By  this  time  America  was  sufficiently  settled  that  coloniza- 
tion was  not  the  difficult  problem  it  had  been  a  half- 
century  before  when  all  supplies  had  to  be  drawn  from 
England  almost  three  thousand  miles  away.  Many  col- 
onists came  to  Carolina  from  New  England  and  Virginia 
as  well  as  from  England  and  countries  on  the  continent 
of  Europe. 

The  next  instance  of  Charles's  generosity  was  the  grant 
of  New  Netherlands  to  his  brotlier  James,  the  Duke  of 
York.  James  granted  the  land  between  the  Hudson  and 
Delaware  to  Lord  Berkeley  and  Sir  George  Carteret,  and 
under  their  control  New  Jersey  was  further  settled  and 
developed.  In  1674  the  colony  was  divided  into  two  parts, 
East  and  West  Jersey,  East  Jersey  going  to  Carteret  and 
West  Jersey  to  William  Penn  and  some  Quaker  associates, 
who    had    previously    purchased    Lord    Berkeley's   rights. 


44  COLONIZATION 

Later  the  Quakers  bought  East  Jersey,  but  they  gave  up 
their  political  authority  in  1702,  after  which  New  Jersey 
was  a  royal  province. 

In  1681  King  Charles  II  gave  to  William  Penn  a  tract 
of  40,000  square  miles  of  land  west  of  the  Delaware  River 
to  satisfy  a  claim  which  Penn's  father  had  held  against 
the  English  government.     Penn  adopted  a  liberal  policy  in 


William   Penn 

disposing  of  his  land  and  in  organizing  the  government 
of  his  territory,  and  thousands  of  English  Quakers,  Ger- 
mans and  Welsh  crossed  the  Atlantic  to  settle  in  Penn- 
sylvania. Though  settled  late,  Pennsylvania  quickly  be- 
came a  rich  and  populous  colony,  and  Philadelphia,  the 
City  of  Brotherly  Love,  which  Penn  himself  founded,  was 
at  the  end  of  the  colonial  period,  larger  than  either  Boston 


COLONIZATION  45 

or  New  York.  By  acquiring  Delaware  from  the  Duke  of 
York  in  1682,  in  order  to  control  the  outlet  from  Pennsyl- 
vania to  the  sea,  Penn  obtained  proprietary  rights  over  a 
second  colony. 

The  last  of  the  original  thirteen  colonies  to  be  settled 
was  Georgia,  which  was  granted  in  1732  to  a  group  of 
philanthropists  as  a  place  where  imprisoned  English 
debtors  could  be  sent  to  start  life  anew.  A  corporation, 
headed  by  General  James  Oglethorpe,  was  organized  to 
finance  the  planting  of  this  colony.  It  was  wholly  an 
enterprise  of  benevolence  with  no  purpose  of  commercial 
gain.  In  addition  to  the  English  debtors  the  company 
sent  to  Georgia  a  number  of  Scotch  Highlanders  and  some 
Germans  from  Salzburg. 

Land  Tenure  in  the  Colonies.  One  of  the  greatest  at- 
tractions which  America  held  for  colonists  was  the  op- 
portunity to  obtain  possession  of  land.  At  the  beginning 
of  English  colonization  it  was  not  intended  that  individual 
settlers  should  own  the  land  and  have  the  right  to  dis- 
pose of  it.  It  was  planned  that  land  tenure  in  America 
should  follow  the  system  prevailing  in  England,  where 
nearly  all  the  land  was  held  in  great  estates  by  a  com- 
paratively small  number  of  persons  and  ownership  could 
be  transferred  from  one  family  to  another  only  with  great 
difficulty.  The  soil  in  England  was  cultivated  almost  en- 
tirely by  tenant  farmers.  It  was  expected  that  the  com- 
mercial companies  and  individual  proprietors  receiving 
grants  of  American  land  from  the  crown  would  retain 
permanent  possession  of  the  grants  and  that  settlers  would 
be  merely  rent-paying  tenants. 

Though  this  system  of  land  tenure  was  started  in  the 
colonies,  it  did  not  last  long.  The  colonists  wanted  land 
which  they  could  call  their  own ;  and  with  such  an 
abundance  of  land  available  their  desire  could  not  be 
denied.     Indeed  it  was  found  necessarv  to  give  the  set- 


46  COLONIZATION 

tiers  possession  of  the  soil  in  order  that  they  would  have 
a  greater  incentive  to  work.  "When  the  Virginia  settlers 
demanded  the  right  of  ownership  the  London  Company 
gave  to  each  resident  shareholder  one  hundred  acres  for 
each  share  of  stock  held.  After  Virginia  became  a  royal 
province  the  practice  of  granting  land  to  individual  set- 
tlers was  continued,  though  it  was  provided  that  the  king 
should  receive  a  small  annual  *'quitrent."  In  New  Eng- 
land the  settlers  obtained  full  possession  of  the  soil,  and 
in  the  proprietary  colonies  the  ownership  of  the  land  was 
widely  distributed,  though  the  proprietors  usually  exacted 
a  small  quitrent  on  the  lands  which  they  sold.  In  all 
the  colonies  land  came  to  be  regarded  just  as  other  prop- 
erty was  regarded,  and  it  could  usually  be  bought  and 
sold  at  will.  The  proprietors  and  the  king  found  it  very 
difficult  to  collect  their  quitrents,  and  payment  was  usually 
infrequent  and  irregular.  "With  the  coming  of  the  Revolu- 
tion these  dues  were  abolished. 

Methods  of  Obtaining  Land.  The  earliest  method  by 
which  settlers  obtained  land  was  by  exercising  their  rights 
as  shareholders  in  the  trading  companies  which  planted 
the  first  colonies.  The  resident  shareholders  in  the  London 
Company,  the  Plymouth  colony,  and  the  Massachusetts  Bay 
Company  received  portions  of  land.  Afterwards  the  com- 
mon method  of  getting  land  was  by  purchase  from  the 
individual  or  company  receiving  the  original  royal  grant. 
William  Penn  sold  large  quantities  of  land  in  Pennsyl- 
vania and  the  proprietors  of  Maryland,  the  Carolinas,  and 
Jersey  did  the  same.  In  those  colonies  which  became 
royal  provinces  land  could  be  purchased  from  the  crown, 
by  application  to  the  royal  governor  or  to  other  authorized 
representatives  of  the  king. 

Land  was  acquired  however  by  other  methods  than  direct 
purchase.  The  possessors  of  American  land  grants  were 
always  anxious  to  secure  settlers,  because  the  more  populous 


COLONIZATION  47 

the  colonies  the  more  value  the  land  would  have.  Many 
of  the  proprietors,  in  order  to  induce  emigrants  to  settle 
on  their  grants,  would  give  a  certain  amount  of  land  out- 
right to  each  settler.  In  the  Carolinas  an  offer  to  settlers 
said  that  "every  Free-man  and  Free-woman  that  transport 
themselves  and  Servants  by  the  25  of  March  next,  being 
1667,  shall  have  for  himself,  wife,  Children  and  Men- 
Servants,  for  each  100  Acres  of  Land  for  him  and  his 
Heirs  forever,"  subject  to  a  yearly  quitrent  of  "at  most 
1/^  d.  per  acre."  The  proprietors  of  the  Jerseys  were 
equally  liberal  to  early  settlers.  So  anxious  was  the 
London  Company  to  encourage  settlement  that  it  gave  one 
hundred  acres  of  land  for  each  laborer  which  any  resident 
of  Virginia  should  bring  to  the  colony.  This  custom  of 
awarding  lands  for  the  importation  of  laborers,  which  was 
known  as  "head  right,"  was  continued  in  Virginia  by  the 
king,  and  it  was  also  adopted  in  other  colonies.  It  not 
only  enabled  colonists  to  acquire  large  holdings  of  land, 
but  made  it  possible  for  America  to  get  many  settlers,  who, 
though  willing  to  leave  Europe,  were  too  poor  themselves 
to  pay  the  cost  of  transportation  to  the  new  world.  In 
New  Netherlands  the  Dutch  authorities  made  huge  grants 
of  land  in  the  Hudson  Valley  to  "patroons,"  who  were 
obliged,  in  return  for  the  grant,  to  bring  over  fifty  tenants 
with  equipment  and  supplies.  Under  this  plan  a  number 
of  great  estates  were  established  in  New  Netherlands,  and 
continued  after  the  colony  came  under  English  rule.  The 
owners  of  these  estates  did  not  adopt  a  policy  of  granting 
land  to  their  tenants,  and  as  a  result  the  settlement  of  the 
Hudson  Valley  was  retarded.  People  wanted  to  become 
their  own  landlords.  The  Earl  of  Bellomont,  when  gov- 
ernor of  New  York,  wrote:  "What  man  will  be  such  a 
fool  as  to  become  a  base  tenant  .  .  .  when  for  crossing 
Hudson's  River  that  man  can  for  a  song  purchase  a  good 
freehold  in  the  Jerseys?" 


48  COLONIZATION 

Size  of  Colonial  Farms.  In  the  southern  colonies,  where 
tobacco  and  rice  came  to  be  the  chief  crops  and  agriculture 
the  only  industry  of  importance,  the  colonists  found  it  ad- 
vantageous to  conduct  the  farming  industry  on  a  large 
scale.  As  a  result  there  were  many  large  plantations.  The 
planters  used  the  privilege  of  "head  right"  extensively, 
and  many  of  them  acquired  estates  containing  several 
thousand  acres.  Anybody  who  visits  the  Lee  homestead  on 
the  south  bank  of  the  Potomac  River  opposite  Washing- 
ton will  find  in  the  old  mansion  a  small  tablet  upon  which 
it  is  told  that  a  large  part  of  the  estate  was  acquired  by 
"head  right." 

In  the  northern  colonies,  while  agriculture  was  the  most 
important  industry,  it  did  not  absorb  the  energies  of  the 
people  so  completely  as  in  the  South.  The  northern  crops 
were  of  a  kind  best  suited  to  intensive  rather  than  ex- 
tensive tillage.  The  people  lived  in  towns  and  villages, 
and  the  average  size  of  farms  was  much  smaller  than  in 
the  southern  colonies.  William  Penn  sold  several  large 
tracts  of  land  in  his  colony,  but  these  tracts  were  later 
broken  up  and  distributed.  New  York  was  the  only 
northern  colony  in  which  large  landed  estates  were  to  be 
found,  and  the  large  landed  estates  there  were  not  for  the 
best  interests  of  the  colony. 

Colonial  Labor.  One  of  the  greatest  problems  of  the 
American  colonists  was  that  of  obtaining  unskilled  labor. 
This  problem  was  especially  serious  in  the  South,  because 
it  was  impossible  to  operate  large  plantations  without 
laborers.  The  abundance  and  cheapness  of  land  caused 
men  to  be  just  as  unwilling  to  do  farm  work  for  wages 
as  to  become  tenants.  With  a  little  thrift  any  free  laborer 
could  soon  become  an  independent  landholder.  As  a  re- 
sult there  were  few  ordinary  wage  laborers  in  the  colonies. 
In  all  the  colonies,  but  more  particularly  in  the  northern 


COLONIZATION  49 

group,  there  were  many  artisans — laborers  skilled  in 
special  work — but  they  were  independent  tradesmen  rather 
than  common  laborers.  Besides  the  settlers  who,  with  the 
aid  of  their  families,  worked  on  their  own  lands,  the 
ordinary  laborers  of  colonial  days  were  for  the  most  part 
indented  servants  and  negro  slaves. 

Indented  Servants.  Indented  servants  were  laborers 
who  were  "bound  out,"  that  is,  placed  under  written  con- 
tract, to  work  for  their  employers  for  a  term  of  years, 
in  return  for  their  maintenance.  There  were  two  classes 
of  indented  servants,  voluntary  and  involuntary. 

The  voluntary  indented  servants,  sometimes  called 
"free-willers"  and  ' '  redemptioners, "  consisted  chiefly  of 
poor  persons  who  agreed  to  serve  for  a  certain  period  of 
time  in  return  for  the  payment  of  their  passage  from 
Europe  to  America.  The  terms  of  service  of  such  laborers 
varied,  seldom  being  less  than  four  or  more  than  seven 
years.  It  was  by  bringing  these  servants  to  America 
that  many  colonial  landholders  added  to  their  estates  by 
the  system  of  ''head  right."  The  employers  thus  obtained 
not  only  labor  but  also  land  for  their  investment.  Colonial 
laws  regulated  the  relations  between  masters  and  servants, 
and  the  contracts  or  "indentures"  usually  provided  that 
at  the  end  of  their  term  of  service  the  servants  should  re- 
ceive sufficient  equipment  to  enable  them  to  start  life  for 
themselves.  Many  of  the  voluntary  indented  servants 
were  young  persons  from  English  almshouses,  sent  to 
America  to  save  the  expense  of  their  maintenance  by  the 
public.  The  planters  were  glad  to  get  such  labor.  In 
fact  so  eager  were  the  colonists  for  servants  that  for  a 
time  it  was  a  common  practice  in  England  to  kidnap  chil- 
dren and  send  them  to  America. 

The  involuntary  indented  servants  were  English  crim- 
inals, who,   instead   of  being   hanged   or   imprisoned   for 


50  COLONIZATION 

their  offenses,  were  sentenced  to  labor  for  long  periods 
of  time  in  the  colonies.  For  the  most  part  these  criminals 
were  guilty  of  only  minor  offenses;  many  of  them  were 
unfortunate  debtors,  and  many  were  political  offenders 
who  had  taken  part  in  some  uprising  in  England  or  Scot- 
land, Some  colonial  employers  preferred  such  "crim- 
inals'* to  the  voluntary  servants  because  their  terms  of 
service  were  longer  and  the  conditions  of  the  indentures 
less  favorable  to  the  servants. 

Negro  Slavery.  In  1619  negro  slavery  was  introduced 
into  the  English  colonies.  The  captain  of  a  Dutch  vessel, 
stopping  at  Jamestown,  sold  twenty  negroes  to  the  Virginia 
planters.  Negro  slavery  had  existed  in  Spanish  American 
colonies  since  early  in  the  sixteenth  century,  and  it  was 
not  strange  that  the  slave  trade  was  extended  to  the  Eng- 
lish colonies  soon  after  the  first  successful  settlement  was 
planted.  The  traffic  grew  steadily,  and  it  is  estimated 
that  in  1760  there  were  nearly  400,000  slaves  in  the  thir- 
teen colonies. 

Though  slavery  existed  in  all  the  colonies  it  flourished 
only  in  the  South.  In  the  northern  colonies,  where  small 
farm  agriculture  prevailed  and  industry  was  varied,  negro 
slavery  was  unprofitable.  The  large  scale  farming  of  the 
South  created  an  incessant  demand  for  laborers.  Had 
wage  labor  been  available  slavery  probably  would  not  have 
grown  much ;  but  with  land  abundant  and  free,  few  people 
would  consent  to  work  for  wages.  The  owners  of  the  large 
plantations  welcomed  white  servitude  and  negro  slavery. 
Once  negro  slavery  was  established  however  the  South  was 
committed  to  large  scale  agriculture  as  its  chief  industry. 
Without  this  "peculiar  institution"  the  development  of 
the  southern  colonies  would  have  been  of  an  entirely  dif- 
ferent character. 


COLONIZATION  51 


Questions  and  Topics 

1.  Compare  the  motives  for  the  colonization  of  America 
with  what  you  know  of  the  motives  for  the  colonization  of 
Australia. 

2.  Tell  when  and  how  the  first  settlement  in  your  own 
State  was  made. 

3.  Does  the  westward  trend  of  migration  bear  any  re- 
lationship to  the  reasons  for  the  colonization  of  the  coast 
in  the  17th  century? 

4.  Give  present  day  examples  of  countries  where  surplus 
population  has  resulted  in  a  demand  for  colonial  expan- 
sion. 

5.  Did  colonial  rivalry  have  any  bearing  on  the  recent 
World  War? 

6.  Has  the  United  States  ever  tried  to  develop  the  re- 
sources of  other  countries,  as  her  resources  were  developed 
by  other  countries? 

7.  What  characteristics  do  you  consider  necessary  to  the 
successful  pioneer  ?  Name  several  pioneers  who  prove  your 
points. 

8.  Compare  the  colonial  labor  problem  with  the  labor 
problem  of  the  twentieth  century  farmer. 


PART  II 
THE  COLONIAL  PERIOD 


CHAPTER  IV 
EARLY  INDUSTRY  AND  COMMERCE,  1607-1660 

The  First  Colonial  Industries.  The  people  of  all  coun- 
tries endeavor  to  develop  those  industries  which  are  most 
profitable — which  give  the  largest  return  for  the  labor  ex- 
pended. Few  nations  have  resources  which  enable  them 
to  be  entirely  self-sufficing,  and  even  if  a  nation  should 
possess  such  resources  the  people  would  find  it  advan- 
tageous to  concentrate  their  energies  on  certain  industries 
for  which  the  country  is  exceptionally  well  adapted  and 
to  exchange  the  products  of  these  industries  for  articles 
which  they  might  produce  but  could  not  produce  so 
cheaply.  The  first  settlers  who  came  to  America  were 
anxious  to  produce  articles  which  would  bring  wealth 
both  to  themselves  and  to  the  investors  who  sent  them 
across  the  ocean.  They  could  not  produce  everything  they 
needed,  and  in  developing  their  industries  they  naturally 
favored  those  which  would  give  the  largest  returns  in  com- 
merce. 

In  all  the  colonies,  however,  the  people  found  it  neces- 
sary to  give  part  of  their  time  to  raising  food  products 
from  the  soil.  It  was  impracticable  to  depend  upon  the 
mother  country  or  upon  other  colonies  for  food  supplies. 
Some  of  the  colonies  eventually  found  that  food  products 
obtained  from  the  soil,  particularly  cereals,  were  the  most 
profitable  articles  for  commercial  purposes,  but  this  was 
not  generally  true.  Nearly  every  colony  had  two  im- 
portant types  of  industry:  the  production  of  food  by  agri- 
culture, and  the  production  of  some  commodity  or  com- 
modities which  could  be  profitably  sold  or  exchanged  in 

55 


56 


EARLY  DEVELOPMENT 


Europe  or  elsewhere.  What  these  commodities  were  de- 
pended to  a  large  extent  upon  natural  resources  and 
climatic  conditions. 

Early  Years  in  Virginia.  The  first  work  of  the  James- 
town settlers  was  to  cut  down  trees  and  build  a  fort  and 
a  few  log  huts  on  the  narrow  peninsula  which  they  selected 
for  their  home.  On  the  space  cleared  by  their  axes  the 
colonists  planted  wheat  and  a  few  vegetable  seeds  which 
they  had  brought  from  England.  The  wheat  grew  to  the 
height  of  a  man,  but  to  the  disappointment  of  the  plant- 


Jamestown  in  1G22 

ers  little  grain  was  obtained,  the  strength  of  the  plant 
being  almost  entirely  absorbed  in  the  long  stalks.  This  was 
the  only  planting  done  in  1607,  the  settlers  preferring  to 
spend  their  time  hunting  for  gold  rather  than  at  the  hard 
work  of  chopping  down  trees  and  tilling  the  soil.  They 
would  have  starved  the  following  winter  had  they  not 
been  able  to  get  food  from  the  Indians.  The  following 
spring  another  attempt  was  made  to  raise  wheat,  but  with 
no  better  success  than  before.     The  colonists  lived  through 


EARLY  DEVELOPMENT  57 

another  winter  on  supplies  brought  from  England  or  pur- 
chased from  the  Indians. 

In  the  spring  of  1609  two  Indian  captives  taught  the 
Jamestown  settlers  how  to  plant  maize  or  corn,  the  native 
American  grain  upon  which  the  Indians  depended  for 
food.  Under  the  energetic  leadership  of  Captain  John 
Smith  forty  acres  of  land  were  carefully  prepared  and 
sowed  with  corn  according  to  instructions  given  by  the 
Indians.  Beans  and  pumpkins  were  also  planted  in  the 
cornfield,  and  for  the  first  time  the  colonists  obtained  a 
substantial  portion  of  their  needed  supplies  by  their  own 
labor.  The  product  of  forty  acres  was  too  small  how- 
ever to  last  more  than  a  few  weeks,  and  the  Indians  hav- 
ing become  unfriendly  and  unwilling  to  share  their  provi- 
sions, the  settlers  had  a  winter  of  terrible  suffering.  The 
few  who  survived  this  "Starving  Time"  were  reduced  to 
a  diet  of  acorns,  roots  and  fish.  All  of  the  small  supply  of 
live  stock  was  killed  and  eaten. 

In  1610  more  ground  was  planted  and  a  large  quantity 
of  supplies  came  from  England.  The  following  year  under 
the  direction  of  the  stern  governor,  Sir  Thomas  Dale, 
the  cultivation  of  the  soil  was  greatly  extended.  Some 
of  the  farm  lands  of  the  Indians  were  seized,  and  the 
colonists  began  also  to  employ  the  Indian  method  of  clear- 
ing land  by  "girdling"  the  trees  with  fire  or  with  axes. 
Dale  was  determined  that  the  settlers  should  produce 
enough  food  for  themselves  and  not  be  dependent  upon 
the  Indians  or  the  supply  ships  from  England.  To  en- 
courage industry  he  assigned  to  each  man  a  small  garden 
plot,  the  products  of  which  were  not  to  be  placed  in  the 
common  store  but  were  to  belong  to  the  individuals  who 
tilled  the  soil.  Another  supply  of  hogs,  cattle,  goats  and 
horses  was  imported,  and  fences  were  built  both  to  protect 
the  fields  and  gardens  from  the  live  stock  and  to  keep 


58  EARLY  DEVELOPMENT 

the  live  stock  from  straying  away.  Before  Dale  left  Vir- 
ginia in  1616  the  colony  was  producing  an  ample  quantity 
of  food.  Each  new  settler  received  upon  his  arrival  a 
four  room  house,  twelve  acres  of  garden  land  inclosed  by 
fences,  a  supply  of  garden  tools,  a  cow,  poultry,  hogs 
and  goats.  He  received  also  provisions  sufficient  to  main- 
tain him  and  his  dependents  for  twelve  months,  after 
which  he  was  expected  to  earn  his  own  support  and  to 
perform  a  certain  amount  of  labor  for  the  London  Com- 
pany. 

The  Beginning  of  Tobacco  Culture.  While  the  in- 
habitants of  Virginia  were  starving  the  London  investors 
were  worrying  because  the  colony  was  yielding  no  profits. 
Once  their  hopes  for  gold  mines  were  gone  they  ordered 
the  colonists  to  send  home  other  products  which  would 
reward  their  expectations  of  wealth,  and  they  angrily 
threatened  to  withdraw  their  support  if  such  products 
were  not  forthcoming.  They  sent  some  Poles  and  Germans 
to  Jamestown  in  1608  to  undertake  the  manufacture  of 
glass,  tar  and  pitch.  In  the  fall  a  vessel  was  despatched 
to  England  with  ''trials  of  Pitch,  Tar,  Glass,  Frankincense, 
and  Soap-Ashes,  with  what  wainscot  and  clapboard  could 
be  provided."  However,  the  dire  need  for  food  prevented 
the  settlers  from  devoting  much  labor  to  anything  but 
their  gardens  and  cornfields,  and  for  a  few  years  the  ship- 
ments to  England  were  of  little  value. 

In  1612  the  cultivation  of  tobacco  was  begun  in  Virginia 
by  John  Rolfe.  Tobacco  was  a  native  American  plant  and 
was  in  common  use  among  the  Indians  long  before  the 
voyage  of  Columbus.  It  was  soon  introduced  into  Europe, 
where  its  use  spread  very  rapidly,  and  the  colonists  of 
the  Spanish  West  Indies  quickly  found  the  plant  to  be  a 
valuable  article  of  commerce.  The  Indians  of  Virginia 
raised  tobacco  for  their  own  consumption,  and  the  early 
settlers  who  had  formed  the  habit  of  using  tobacco  before 


EARLY  DEVELOPMENT  59 

coining  to  America  purchased  their  supply  from  their  red 
neighbors.  Since  trade  between  the  white  men  and  the 
Indians  soon  became  uncertain  because  of  almost  constant 
warfare,  Rolfe  planted  some  tobacco  in  order  to  be  sure 
of  a  supply  for  his  own  use.  Other  settlers  followed 
Rolfe 's  example.  Within  a  short  time  a  small  shipment 
of  tobacco  was  sent  to  England  where  it  was  readily  sold 
for  a  good  price. 

Cultivation  of  the  new  product  was  at  once  extended. 
Here  at  last  was  a  commodity  which  answered  the  demands 
of  settlers  and  shareholders  for  something  of  commercial 
value.  It  could  be  easily  raised  in  large  quantities  on  the 
fertile  Virginia  land,  the  cost  of  transportating  it  to  Eng- 
land was  less  than  one-half  penny  a  pound.  No  other  Vir- 
ginia commodity  could  be  shipped  across  the  ocean  for  an 
amount  so  small  in  proportion  to  its  price.  It  was  esti- 
mated that  a  man's  labor,  when  devoted  to  tobacco  culture, 
had  a  value  of  sixty  pounds  a  year ;  when  devoted  to  pro- 
ducing grain  a  value  of  only  ten  pounds  a  year. 

So  enthusiastic  did  the  Virginia  colonists  become  about 
tobacco  that  they  were  soon  giving  virtually  all  their  time 
to  its  production.  When  Captain  Argall  came  to  the 
colony  as  governor  in  1617  he  found  the  streets  and  market 
place  of  Jamestown  planted  with  tobacco.  In  1619  the 
colony  exported  20,000  pounds  of  tobacco,  in  1620  more 
than  40,000  pounds'.  The  settlers  neglected  to  raise  corn 
and  other  foodstuffs  and  in  1621  many  of  them  gave  their 
firearms  and  ammunition  to  the  Indians  in  exchange  for 
corn.  Deprived  of  their  chief  means  of  defense  they  were 
easy  victims  of  an  Indian  massacre  in  the  spring  of  1622. 
Several  hundred  colonists  perished  in  the  uprising,  many 
homes  were  burned,  and  a  large  portion  of  the  colony's 
live  stock  was  driven  off  and  killed.  Another  brief  period 
of  famine  caused  the  authorities  to  issue  orders  for  each 
settler  to  raise  a  supply  of  food  adequate  for  his  needs. 


60  EARLY  DEVELOPMENT 

Tobacco  the  Leading  Colonial  Product.  When  King 
James  heard  of  the  growing  importance  of  tobacco  culture 
in  Virginia  he  was  greatly  vexed.  He  objected  strongly 
to  tobacco  smoking  and  had  written  a  long  essay,  "The 
Counterblast  to  Tobacco,"  in  which  he  described  the  use  of 
the  "filthy  weed"  as  "a  custom  loathsome  to  the  eye, 
hateful  to  the  nose,  harmful  to  the  brain,  dangerous  to  the 
lungs,  and  in  the  black  stinking  fume  thereof  nearest  re- 
sembling the  horrible  Stygian  smoke  of  the  pit  which  is 
bottomless,"  The  king  thought  too  that  the  colonists  in 
Virginia  should  produce  articles  which  England  was  ac- 
customed to  buy  from  continental  Europe.  In  obedience 
to  the  king's  suggestions  officers  of  the  London  Company 
endeavored  to  persuade  the  colonists  to  engage  in  other 
occupations  than  the  raising  of  tobacco.  Another  attempt 
was  made  to  begin  the  manufacture  of  glass;  each  colonist 
was  ordered  to  plant  vines  for  the  purpose  of  starting  a 
wine  industry  (King  James  could  drink,  though  he  could 
not  smoke)  ;  the  production  of  silk  was  started  on  a  small 
scale;  hemp  and  flax  were  raised  on  many  plantations; 
and  an  effort  was  made  to  introduce  the  cultivation  of 
indigo  and  other  plants.  In  spite  of  all  these  efforts  the 
colonists  persisted  in  raising  tobacco.  The  people  of 
Europe  demanded  it  in  increasing  quantities,  and  the 
Virginians  found  it  more  profitable  than  any  other  article 
they  tried  to  produce.  In  a  short  time  they  were  per- 
mitted to  have  their  own  way.  The  king  contented  himself 
with  taxing  the  shipments  sent  to  England,  the  large 
revenue  causing  him  to  forgive  his  obstinate  subjects. 

In  1660  the  exports  of  tobacco  from  Virginia  were 
nearly  8,000,000  pounds.  Not  only  did  tobacco  continue  to 
be  the  most  important  product  of  Virginia,  but  from  a 
commercial  standpoint,  it  was  by  far  the  most  important 
product  of  the  colonies  during  the  entire  period  of  colonial 
history.     We  now  have  so  many  agricultural  products  of 


EARLY  DEVELOPMENT 


61 


much  greater  value  than  tobacco  that  it  is  hard  to  realize 
that  this  plant  was  for  nearly  two  hundred  years  the 
most  valuable  article  raised  on  American  soil. 

Other  Products  of  Virginia.  After  the  disastrous  ex- 
perience of  1622  the  Virginia  planters  usually,  though 
not  always,  raised  sufficient  quantities  of  grain  and  other 
food  plants  for  their  own  use.  Corn  was  planted  in  in- 
creasing quantities,  and  beans,  peas,  potatoes,  cabbage, 
turnips  and  all  other  ordinary  garden  vegetables  were 
raised  in  abundance.  Virtually  all  the  plantations  had 
orchards  of  apple,  peach,  plum  and  pear  trees.     It  was 


Farm  Implements  of  the  Eighteenth  Century 

found  that  land  exhausted  by  successive  crops  of  tobacco 
would  still  produce  both  wheat  and  corn.  This  fact  tended 
to  encourage  the  planting  of  grain.  Moreover  tobacco 
was  raised  in  such  large  quantities  that  the  price  often 
fell  to  a  low  point.  The  Virginia  government  for  a  time 
permitted  only  a  limited  amount  to  be  planted  and  allowed 
only  the  best  grade  to  be  exported.  This  action  stimulated 
the  raising  of  grain  and  many  of  the  plantations  soon 
had  such  large  crops  that  they  could  sell  both  corn  and 
wheat  to  other  colonies.  In  1634  ten  thousand  bushels  of 
Virginia  corn  were  sold  in  New  England.     Corn  meal  and 


62  EARLY  DEVELOPMENT 

wheat  flour  were  first  made  with  hand  mills.  Mills  oper- 
ated by  horses  and  oxen  were  soon  introduced;  in  1640 
Virginia  had  four  windmills  and  five  watermills  for  grind- 
ing grain. 

Tools  and  Implements.  The  farming  implements  used 
by  the  Virginia  planters,  and  by  the  settlers  of  other 
colonies,  were  chiefly  hand  tools,  of  which  the  hoe,  the 
spade  and  the  mattock  were  the  most  important.  The 
plows  of  the  colonial  period  were  unwieldy  affairs  made 
of  wood  with  the  exception  of  the  tips  and  shares,  which 
were  iron.  They  were  so  heavy  and  so  difficult  to  hold 
in  the  ground  that  four  oxen  and  two  or  three  men  were 
usually  required  to  operate  a  single  plow;  they  were 
easily  broken  and  in  newly  cleared  land  the  roots  and 
stumps  made  the  use  of  plows  impossible.  Virginia  had 
no  plows  for  several  years  because  of  the  lack  of  animals 
to  draw  them,  but  by  1648  there  were  150  plows  in  the 
colony.  Wooden  harrows  were  used  to  prepare  plowed  soil 
for  planting,  seeds  were  sown  by  hand,  and  the  cultivation 
of  growing  crops  and  the  removal  of  weeds  were  likewise 
accomplished  by  manual  labor.  Wheat,  rye,  and  similar 
grains  were  cut  with  sickles  or  "hooks"  and  threshed  with 
flails  or  by  horses  and  oxen  treading  on  a  threshing  floor. 
Hay  and  straw  were  handled  with  hand  rakes  and  forks 
made  entirely  of  wood.  In  addition  to  farming  imple- 
ments each  farmer  had  axes,  hatchets,  saws,  hammers,  pick- 
axes, augers  and  chisels  for  use  in  clearing  land  and  in 
building. 

Live  Stock.  The  Virginia  settlers  soon  secured  large 
numbers  of  hogs  and  cattle.  There  was  sufficient  grazing 
for  the  cattle  in  forests  and  thickets,  and  the  hogs  lived 
mainly  upon  roots  and  the  large  quantities  of  mast  which 
fell  from  oak  and  hickory  trees.  Each  planter  had  an 
abundance  of  milk,  butter  and  cheese.  Milk  cows  and 
oxen  used  for  farming  and  hauling  were  sheltered  and 


EARLY  DEVELOPMENT  63 

fed,  but  most  of  the  cattle  and  all  the  hogs  ran  wild  in 
the  forests,  the  planters  giving  them  neither  feed  nor 
shelter  even  in  the  winter  time.  Pork  and  beef  were  cheap 
and  plentiful;  Virginia  sold  hogs  and  cattle  to  the  early- 
settlers  of  other  colonies.  Horses  and  sheep  were  brought 
to  Virginia  soon  after  the  settlement  of  Jamestown,  but 
the  number  of  these  animals  was  not  yet  large  in  1660. 

Imports  of  Virginia.  The  early  Virginia  settlers  pro- 
duced little  besides  food  and  tobacco.  Clothing,  shoes, 
hats,  firearms,  household  furnishings  for  all  parts  of  the 
home,  tools  and  equipment  were  purchased  from  England 
and  paid  for  with  tobacco.  At  first  all  trading  was  done 
by  the  London  Company.  After  the  Company  was  dis- 
solved it  became  customary  for  the  planters  to  employ 
agents  or  factors  in  England  who  sold  the  tobacco  and 
purchased  the  goods  which  the  planters  ordered.  A  few 
merchants  came  to  Virginia  and  established  stores  where 
the  planters  could  exchange  their  tobacco  for  imported 
supplies,  but  during  the  early  period  of  Virginia's  history 
such  merchants  were  few  in  number  and  their  business 
small.  The  early  plantations  were  situated  along  navigable 
streams  and  trade  was  carried  on  directly  between  planta- 
tion wharf  and  English  seaport.  Some  of  the  planters  had 
their  own  ships,  but  for  the  most  part  the  vessels  which 
carried  traffic  to  and  from  Virginia  belonged  to  English 
ship  owners.  A  few  attempts  were  made  to  start  ship- 
building in  Virginia,  but  like  other  undertakings  it  made 
no  progress  after  tobacco  planting  became  general.  More- 
over there  was  no  need  for  the  Virginia  colonists  to  con- 
struct ships.  The  demand  for  tobacco  in  England  and  the 
demand  for  English  goods  in  Virginia  made  possible  a 
large  direct  trade  with  full  cargoes  in  both  directions. 
English  shipowners  gladly  took  advantage  of  the  oppor- 
tunity to  engage  in  the  profitable  carrying  trade  between 
the  colony  and  the  mother  country.     Dutch  vessels  too, 


64  EARLY  DEVELOPMENT 

before  1660,  came  occasionally  to  Virginia  to  secure  tobacco 
and  dispose  of  European  wares. 

Early  Industry  of  New  England.  Landing  late  in  De- 
cember, 1620,  the  Pilgrims  built  a  few  log  shelters  but 
these  did  not  give  sufficient  protection  against  the  cold 
of  a  New  England  winter.  The  store  of  provisions  brought 
in  the  Mayflower  was  much  too  small,  and  before  the 
winter  ended  nearly  half  the  settlers  died  of  sickness  caused 
by  hunger  and  exposure. 

In  April  the  colonists  planted  wheat,  peas  and  Indian 
com.  The  Indian  population  of  New  England  had  been 
greatly  reduced  by  disease  and  famine  during  the  years 
just  preceding  the  coming  of  the  Pilgrims,  and  the  set- 
tlers used  the  fields  which  had  once  been  cultivated  by 
the  natives.  It  was  fortunate  that  these  fields  were  avail- 
able because  the  men  of  Plymouth  were  too  weak  to  clear 
new  land.  The  soil  in  which  they  sowed  their  grain  had 
lost  much  of  its  fertility,  but  Squanto,  a  friendly  Indian, 
taught  them  how  to  fertilize  the  hills  of  corn  with  fish, 
and  he  also  showed  them  how  to  care  for  the  growing 
crops.  The  wheat  and  peas  did  not  do  well  this  first 
season,  but  there  was  a  large  harvest  of  corn. 

During  the  summer  the  colonists  built  better  homes  and 
a  small  fort,  and  made  a  considerable  quantity  of  clap- 
board to  send  to  England.  In  September  some  of  the 
men  went  on  a  short  trading  expedition  among  the  Indians, 
exchanging  beads  and  cloth  for  beaver  and  other  skins. 
When  a  ship  came  in  November  bringing  additional  set- 
tlers it  was  sent  back  with  a  cargo  of  clapboard  and  skins 
of  a  value  of  nearly  five  hundred  pounds. 

The  second  winter  was  passed  more  comfortably  than 
the  first  though  it  was  necessary  to  limit  closely  the  allot- 
ments of  food.  The  following  spring,  though  more  grain 
was  planted,  the  colony  began  to  experience  trouble  be- 
cause of  a  refusal  of  many  members  to  work.     The  com- 


EARLY  DEVELOPMENT  65 

munal  system  was  a  source  of  much  discontent  and  trouble. 
Governor  Bradford  wrote,  "The  young  men  that  are  most 
able  and  fitte  for  labor  and  service  did  repine  that  they 
should  spend  their  time  and  strength  to  worke  for  other 
mens  wives  and  children  without  any  recompense.  The 
strong,  or  man  of  parts,  had  no  more  in  the  divission  of 
victals  and  cloaths,  than  he  that  was  weake  and  not  able 
to  doe  a  quarter  the  other  could;  this  was  thought  injus- 
tice." After  anothel*  winter  of  hunger  the  communal 
system  was  partly  abandoned,  and  each  man  received  a 
small  piece  of  land  to  tend,  the  produce  of  which  he  was 
permitted  to  keep  for  himself.  A  few  years  later  the 
individual  allotments  were  increased  to  twenty  acres. 
Under  this  plan  of  individual  ownership  industry  revived 
and  the  period  of  famine  came  to  an  end. 

The  supply  of  food  assured,  the  leaders  of  the  Plymouth 
colony  gave  increased  attention  to  the  production  of  arti- 
cles from  which  a  commercial  profit  could  be  derived  for 
the  shareholders.  A  few  attempts  were  made  to  estab- 
lish a  fishing  industry  but  they  were  unsuccessful.  The 
most  profitable  of  the  early  ventures  of  the  Pilgrims  was 
the  fur  trade.  It  was  from  this  trade  that  the  colonists  ob- 
tained nearly  all  the  money  with  which  to  pay  the  debt  in- 
curred when  in  1627  they  bought  out  the  interest  of  the 
English  shareholders.  In  1624  a  ship  carpenter  sent  from 
England  built  two  strong  shallops  for  the  colony,  and  with 
these  small  vessels  the  fur  trade  was  steadily  extended. 
Cloth,  beads,  and  tools  from  England,  and  corn  raised  by 
the  colonists  themselves,  were  exchanged  for  skins  at  small 
trading  posts  established  along  the  coast,  and  valuable  car- 
goes of  fur  were  regularly  shipped  to  England.  Trade  was 
opened  with  the  Dutch  of  New  Netherlands,  giving  a  fur- 
ther opportunity  for  gain.  New  settlers  came  each  year 
and  the  little  colony  steadily  prospered. 

The  Plymouth  colony  grew  slowly  in  population.     The 


66  EARLY  DEVELOPMENT 

real  industrial  development  of  New  England  did  not  be- 
gin until  after  the  Massachusetts  Bay  Company  began  to 
establish  its  settlements.  Like  the  Plymouth  colonists  the 
early  settlers  of  the  Bay  colony  directed  their  first  efforts 
toward  agriculture.  Grain  was  raised  in  large  quantities; 
windmills  and  watermills  were  erected  to  make  meal  and 
flour.  Gardens  and  orchards  gave  vegetables  and  fruits 
in  plenty,  and  cattle,  hogs  and  poultry  supplied  an  abun- 
dance of  meat  and  dairy  products.  But  while  agriculture 
was  the  earliest,  and  throughout  the  entire  colonial  period, 
the  most  important  industry  of  New  England,  it  did  not 
become  the  basis  of  New  England's  commerce.  Articles 
which  were  not  products  of  the  farm  were  found  to  give 
greater  rewards  in  trade.  Of  these  articles  by  far  the  most 
important  was  fish. 

The  New  England  Fisheries.  The  waters  along  the  New 
England  shore  contained  large  quantities  of  fish — cod, 
mackerel,  alewives,  bass — as  well  as  such  shellfish  as 
oysters,  clams  and  lobsters.  All  these  fish  were  used  as 
food  by  the  people  of  New  England  but  the  cod  was  the 
leading  fish  of  commerce.  Codfish,  salted  and  dried,  could 
be  kept  for  a  long  time  and  could  easily  be  transported  to 
any  market. 

Though  the  Plymouth  colony  failed  to  make  a  success  of 
fisheries  the  Massachusetts  Bay  colony  soon  developed  the 
industry  to  such  an  extent  that  it  became  the  "corner- 
stone of  New  England  prosperity."  To  start  the  fisheries 
on  an  extensive  scale  required  a  substantial  investment  of 
capital  in  ships  and  equipment.  Many  of  the  settlers 
were  reluctant  to  consent  to  such  an  investment.  How- 
ever a  few  of  the  leading  men  of  the  colony  saw  the  pos- 
sibilities of  gain  in  the  fisheries,  and  their  persistent  urging 
overcame  all  objections.  Hugh  Peter,  the  pastor  of  the 
church  at  Salem,  did  more  than  any  other  person  to  in- 
duce the  colony  to  engage  in  the  fishing  business  on  a 


EARLY  DEVELOPMENT  67 

large  scale.  With  tireless  energy  he  went  from  place  to 
place  telling  of  the  industrial  and  commercial  opportunity 
which  the  fisheries  afforded,  and  he  succeeded  also  in  ob- 
taining some  capital  from  England.  To  encourage  fishing 
the  General  Court  of  Massachusetts  exempted  fishing  ves- 
sels and  equipment  from  taxation  for  a  period  of  seven 
years,  while  ship  carpenters  and  fishermen  were  excused 
from  military  duty. 

The  early  fishing  ventures  proved  successful  and  the 
industry  grew  rapidly.  In  1641  Massachusetts  exported 
300,000  dried  fish.  In  all  the  New  England  colonies  fish 
became  the  leading  export. 

The  fisheries  were  important  not  only  because  of  the 
valuable  product  which  they  supplied  but  also  because  they 
had  much  to  do  with  the  rise  of  other  industries  in  New 
England  and  with  the  character  of  New  England's  com- 
merce. One  of  the  leading  industries  with  which  fishing 
was  closely  connected  was  shipbuilding. 

Shipbuilding  in  New  England.  Shipbuilding  began  in 
New  England  when,  in  1631,  John  Winthrop,  the  governor 
of  Massachusetts  Bay,  built  a  small  sloop,  The  Blessing  of 
the  Bay,  at  Mystic.  This  vessel,  of  about  sixty  tons  bur- 
den, was  used  in  trading  along  the  coast.  Another  vessel 
of  the  same  size  was  built  at  Mystic  two  years  later,  and  in 
1636  a  vessel  of  one  hundred  and  twenty  tons  was  built  at 
Marblehead.  Though  shipbuilding  was  begun  before  the 
fishing  industry  became  important,  it  developed  rapidly 
once  the  fisheries  were  well  started.  Shipyards  were  es- 
tablished in  virtually  all  the  coast  towns  of  Massachusetts, 
Connecticut,  Rhode  Island  and  New  Hampshire.  Boston, 
Cambridge,  Dorchester,  Marblehead,  Salem,  New  Bedford, 
Newport,  New  London  had  yards  making  small  vessels  for 
the  fisheries  and  ships  of  two  hundred  to  three  hundred  tons 
for  overseas  trade.  The  first  ship  built  in  Boston  was  The 
Trial,  a  vessel  of  two  hundred  tons,  launched  in  1642.  By 


68  EARLY  DEVELOPMENT 

1660  Massachusetts  had  more  than  one  hundred  sailing 
vessels,  of  which  a  dozen  were  above  two  hundred  tons 
each.  By  this  time  the  New  England  shipyards  were  turn- 
ing out  vessels,  large  and  small,  to  be  sold  in  England  and 
in  the  other  colonies.  The  forests  of  fir  and  pine  at  the 
water's  edge  afforded  an  abundance  of  the  finest  ship- 
building materials,  while  the  fisheries  and  commerce  created 
the  demand  which  caused  the  shipbuilding  business  to 
flourish. 

Early  Commerce  of  New  England.  Like  the  other 
colonies  in  America  the  New  England  colonies  were  com- 
pelled to  secure  many  necessities,  such  as  tools,  clothing, 
household  furnishings,  sugar  and  wine,  from  outside 
sources.  Nearly  all  the  salt  for  the  fisheries  and  much  of  the 
equipment  for  fishing  vessels  and  other  ships  were  also 
imported.  To  secure  these  articles  New  England  sold 
fish,  furs,  ships,  lumber,  staves,  grain  and  meat.  How- 
ever the  commerce  of  New  England  could  not  be  carried 
on  by  a  system  of  direct  exchange.  Virginia  secured 
most  of  her  needed  imports  from  England,  and  England 
was  virtually  the  only  market  for  Virginia's  great  export. 
While  the  people  of  New  England  bought  a  large  part 
of  their  imported  supplies  from  England,  they  could  sell 
only  a  relatively  small  part  of  their  exports  to  the  mother 
country. 

Fish,  the  leading  export  of  New  England,  could,  before 
1660,  be  sold  in  England,  but  only  in  small  quantities,  be- 
cause English  fishermen  were  able  to  supply  their  home 
market.  After  1660  New  England  fish  were  entirely  ex- 
cluded from  the  English  markets  by  prohibitory  tariff 
duties.  The  New  England  fishermen,  from  the  beginning 
of  the  fishing  industry,  found  their  markets  in  many 
places.  The  "merchantable"  cod,  the  fish  of  large  size 
and  first  class  quality,  were  sold  in  Spain  and  Portugal. 


EARLY  DEVELOPMENT  69 

the  "middling,"  or  second  grade  fish,  were  shipped  to  the 
Azores  and  Canary  Islands,  and  the  fish  of  poorest  quality 
were  sent  to  the  West  Indies  where  they  were  used  to  feed 
the  negro  slaves  of  the  sugar  planters.  Staves,  heading, 
sawed  lumber,  horses,  salt  pork,  flour  and  grain  were  also 
shipped  to  the  West  Indies.  In  fact  these  islands  offered 
the  best  market  for  New  England  products  throughout  the 
colonial  period.  Lumber,  ships  and  furs  were  sold  in 
England,  but  the  exports  of  these  articles  paid  for  only  a 
small  part  of  the  goods  which  the  New  Englanders  bought 
from  the  mother  country.  Their  debts  to  English  mer- 
chants were  settled  by  the  proceeds  of  sales  in  the  West 
Indies  and  Southern  Europe. 

The  commerce  of  New  England  differed  in  another  im- 
portant particular  from  the  commerce  of  the  Virginians, 
in  that  while  the  Virginians  let  English  shipowners  and 
merchants  carry  and  market  their  tobacco,  the  New  Eng- 
landers did  most  of  their  carrying  and  trading  themselves. 
This  was  due  to  several  circumstances.  Vessels  from 
England  did  not  come  to  New  England  as  frequently  and 
regularly  as  to  Virginia  because  of  the  scarcity  of  return 
cargoes  to  England.  This  fact  made  it  necessary  for 
the  people  of  New  England  to  carry  their  own  goods  to 
market.  Once  having  ships  of  their  own  the  people  found 
it  profitable  to  extend  their  trade  and  to  use  their  vessels 
in  carrying  goods  for  others.  During  seasons  of  the  year 
when  little  or  no  fishing  was  done  the  fishing  vessels  were 
employed  in  commercial  voyages  to  the  West  Indies  and 
to  other  colonies  along  the  Atlantic  coast.  New  England 
soon  had  a  large  number  of  skilful  and  daring  mariners 
and  many  shrewd  and  enterprising  merchants,  traders 
and  shipowners,  who,  working  together,  took  New  England 
products  in  New  England  ships  to  many  parts  of  the  world. 
Home  merchants  and  shipowners  took  care  of  virtually  all 


70  EARLY  DEVELOPMENT 

of  New  England's  extensive  trade  with  the  West  Indies 
and  with  Southern  Europe,  and  took  care  of  part  of  the 
trade  with  England. 

Early  Manufactures  of  New  England.  The  lack  of 
regular  intercourse  with  England  induced  the  colonists 
of  New  England  to  try  making  for  themselves  many 
products  which  the  Virginians  imported  from  the  mother 
country.  Moreover  the  long  cold  winters,  which  prevented 
outdoor  labor,  tended  to  encourage  the  development  of 
those  industries  which  could  be  carried  on  by  the  home 
fireside.  The  manufactured  articles  which  the  New  Eng- 
landers  first  endeavored  to  make  for  themselves  were 
clothing  and  shoes.  Spinning  wheels  and  looms  appeared 
in  Massachusetts  at  an  early  date.  Sheep  were  imported 
and  flax  was  raised  to  supply  material  for  woolens  and 
linens,  and  cotton  was  brought  from  the  West  Indies.  In 
1640  the  General  Court  of  Massachusetts  provided  that  for 
three  years  a  small  bounty  should  be  given  for  linen, 
woolen  and  cotton  cloth  spun  and  woven  in  the  colony. 
In  1639  a  fulling  mill  was  started  at  Rowley  by  a  small 
group  of  colonists,  who  with  their  pastor,  Ezekiel  Rogers, 
had  been  exiled  from  Yorkshire  because  of  their  religious 
belief.  As  early  as  1634,  a  tannery  was  erected  at 
Ipswich  and  several  mo;re  tanneries  were  soon  established 
in  other  New  England  towns.  ]\Iany  shoemakers  came  to 
New  England  to  pursue  their  trade.  Large  quantities  of 
leather  were  used  in  making  clothing  for  servants  and 
laborers. 

Among  the  earliest  of  New  England's  manufacturing  in- 
dustries was  that  of  sawing  lumber.  A  sawmill,  operated 
by  water  power,  was  built  at  Portsmouth,  New  Hamp- 
shire, in  1635  and  it  was  quickly  followed  by  many  others 
throughout  all  the  New  England  colonies.  Very  often  a 
sawmill  was  built  alongside  a  gristmill,  the  same  water 
power   serving   both.     Lumber   was   exported   to    foreign 


EARLY  DEVELOPMENT  71 

markets,  and  it  was  also  used  extensively  for  building  pur- 
poses in  the  growing  New  England  communities.  The 
early  log  huts  soon  gave  way  to  handsome  frame  dwellings, 
and  before  1660  mansions  of  brick  and  stone  were  not  un- 
familiar. For  these  mansions  the  brick,  lime  and  tile  were 
frequently  made  by  the  colonists  themselves.  A  few  efforts 
were  made  to  manufacture  glass,  but  they  did  not  meet 
with  much  success. 

Another  necessity  which  the  colonists  tried  to  provide 
for  themselves  was  iron.  Iron  ore  was  not  abundant  in  the 
coastal  region  of  New  England,  but  enough  was  found  in 
various  peat-bogs  to  justify  the  construction  of  furnaces. 
The  first  of  these,  erected  near  Lynn  in  1643,  was  operated 
for  more  than  a  century.  Another  iron  furnace  was  built 
at  Braintree  in  1645,  and  one  at  Raynham  in  1652.  From 
the  metal  manufactured  in  these  furnaces  were  made  iron 
pots  and  fittings  for  agricultural  implements  and  for  ships. 

The  manufacture  of  liquor  was  another  early  industry 
of  New  England.  Breweries  were  common,  though  after 
apples  became  plentiful  home-made  cider  was  drunk  more 
than  beer.  Another  liquor  widely  used  in  New  England 
was  rum,  distilled  from  West  India  molasses.  The  fisher- 
men and  lumbermen  wanted  a  stronger  drink  than  beer  or 
cider,  and  West  India  rum  was  cheap  and  easily  obtained. 
At  first  the  entire  supply  was  imported,  but  in  1648  a  small 
distillery  was  opened  at  Salem.  Distilling  did  not  become 
a  highly  important  industry  however  until  nearly  a 
century  later. 

New  England  Industry  Diversified.  The  industries  of 
New  England  were  much  more  diversified  than  the  in- 
dustries of  any  other  group  of  colonies.  The  people  in 
the  region  south  of  New  England  centered  their  activities 
about  agriculture.  While  agriculture  flourished  in  New 
England  it  did  not  afford  the  opportunity  for  gain  which 
could  be  found  in  other  lines  of  endeavor.     The  fisheries 


72  EARLY  DEVELOPMENT 

became  the  basis  of  an  industry  of  almost  equal  importance. 
Closely  related  to  fishing  was  the  shipbuilding  industry 
and  out  of  these  two  enterprises  grew  an  active  commerce 
which  was  conducted  largely  by  home  traders  and  ship- 
owners. Household  manufactures  kept  hand  and  mind 
from  idleness  during  the  long  evenings  of  winter.  The 
thrifty  and  industrious  New  Englanders  turned  many 
ways  to  find  their  fortunes. 

Other  Colonies  Before  1660.  The  early  economic  devel- 
opment of  Maryland  was  similar  to  that  of  Virginia.  Ag- 
riculture was  the  only  industry  of  importance  and  tobacco 
the  chief  product  for  export. 

The  first  settlements  of  New  Netherlands  were  planted 
as  trading  posts.  At  the  beginning  of  the  seventeenth 
century  the  Dutch  nation  was  the  leading  commercial 
nation  of  Europe.  Dutch  traders  went  over  the  world 
gathering  up  the  products  of  all  lands  to  sell  among 
Europeans.  What  drew  them  to  America  was  the  valuable 
furs  and  skins,  which  they  obtained  from  the  Indians  for 
cloth,  ornaments,  firearms  and  liquor.  Though  the  fur 
tt-ade  remained  the  leading  economic  activity  of  New 
Netherlands  during  the  entire  period  of  Dutch  occupancy, 
agriculture  was  soon  developed  by  settlers  who  came  to 
the  Hudson  Valley  from  the  Netherlands,  France,  England 
and  other  parts  of  Western  Europe.  The  colony  did  not 
prosper  because  of  the  burdensome  regulations  imposed 
upon  the  people  by  the  governing  authorities  and  because 
of  frequent  trouble  with  the  Indians. 

In  New  Sweden  the  fur  trade  was  likewise  the  chief 
commercial  activity.  The  land  of  the  Delaware  Valley 
was  excellent  for  agriculture  and  the  river  banks  about  the 
small  villages  which  the  Swedes  established  were  soon 
dotted  with  farms  whose  abundant  crops  of  cereals,  vege- 
tables and  fruits  assured  plenty  and  contentment  to  the 
thrifty  and  industrious  settlers. 


EARLY  DEVELOPMENT  73 

The  Colonies  in  1660.     By  1660  two  centers  of  English 
colonization    on    the    American    continent,    Virginia    and 
Maryland  in  the  South  and  New  England  in  the  North, 
were  firmly  established.     A  narrow  fringe  of  the  great  wil- 
derness had  been  cut  away  to  make  room  for  homes.     The 
subjection  of  the  continent  had  started.     The  land  and  the 
sea  were  yielding  their  products  to  the  incessant  toil  of 
the  sturdy  settlers,  and  already  the  economic  development 
of  the  two  groups  of  English  colonies  had  assumed  the 
course  it  was  to  follow  with  but  little  change  for  more  than 
a   century.     The    English   colonies   had   a   population   of 
approximately  eighty  thousand,  two-thirds  of  whom  lived 
in  the  settlements  about  Chesapeake  Bay.     With  the  ex- 
ception of  a  few  hundred  negro  slaves  and  small  groups 
of  Scotch,  French  Huguenots  and  Irish  the  colonists  were 
emigrants  from  England  or  their  children.     New  Nether- 
lands and  New  Sweden,  the  latter  becoming  a  Dutch  pos- 
session in  1655,  had  probably  seven  thousand  people,  half 
of  whom  were  English,  the  remainder  Dutch  and  Swedish. 
The  region  controlled  by  the  Dutch  had  not  made  such 
rapid  progress  as  the  English  colonies,  but  it  was  becau>se 
of  mismanagement  and  misrule,  and  not  because  the  land 
did  not  offer  suitable  opportunity. 

The  commerce  of  the  English  colonies  in  America  had 
grown  steadily  since  the  first  settlements  had  been  planted. 
The  market  for  English  goods  in  America  was  even  greater 
in  extent  than  had  been  hoped  for,  and  the  increasing 
surplus  which  the  colonists  sent  abroad  each  year  signified 
growing  wealth  and  prosperity.  The  experimental  stage 
of  colonization  had  passed.  Industrial  and  commercial  ac- 
tivities had  reached  such  proportions  in  the  colonies  that 
the  time  had  arrived  for  the  English  government  to  under- 
take their  regulation  by  law.  The  year  1660  witnessed  the 
first  important  step  taken  by  Parliament  in  the  formation 
of  an  economic  policy  with  respect  to  the  English  colonies. 


74  EARLY  DEVELOPMENT 

Questions  and  Topics 

1.  Show  the  causes  that  have  led  to  concentration  upon 
certain  industries  in  your  own  State. 

2.  From  your  observation  of  industries  in  America, 
would  you  say  that  the  production  of  necessities  or  luxu- 
ries pays  better? 

3.  Compare  the  life  of  the  American  colonial  farmer 
with  that  of  the  English  farmer  of  the  same  period. 

4.  What  indirect  influence  did  the  Indian  have  upon 
commerce  ? 

5.  Name  three  instances  where  communal  ownership 
has  proved  unsuccessful.  What  are  the  weaknesses  of  such 
a  form  of  government? 

6.  Make  a  list  of  some  present  day  farm  implements 
that  have  added  to  the  efficiency  of  farm  production 
and  reduced  the  niunber  of  men  required  for  operation. 

7.  What  relation  does  the  existence  of  waterways  bear 
to  the  development  of  a  country? 

8.  Make  parallel  lists  of  the  products  of  the  Virginia  and 
Plymouth  colonies,  and  their  present  day  States? 

9.  As  a  venture  in  colonization,  which  would  you  con- 
sider more  successful — Plymouth  or  Virginia?     Why? 

10.  How  can  you  account  for  the  fact  that  New  England 
and  not  Virginia  became  the  center  of  the  shipbuilding 
trade  ? 

11.  What  influence  did  climate  have  on  industries  in 
the  colonies? 

12.  Can  you  give  any  instances  of  legislation  to  en- 
courage industry  in  your  own  State  comparable  with  the 
Massachusetts  legislation  to  encourage  textile  industries? 


CHAPTER  V 

ENGLISH  COLONIAL  POLICY,  1660-1763 

The  Mercantile  System.  In  order  to  understand  the 
nature  and  purpose  of  the  colonial  policy  of  England  one 
must  know  the  general  economic  policy  which  the  nations 
of  Europe  followed  during  the  seventeenth  and  eighteenth 
centuries.  This  policy,  which  has  been  named  the  "mer- 
cantile system,"  was  founded  upon  extreme  national 
selfishness.  National  feeling  was  very  strong.  Many 
European  countries  were  endeavoring  to  build  up  great 
empires,  and  all  followed  the  plan  of  regulating  industry 
and  trade  in  a  manner  which  it  was  thought  would  con- 
tribute most  effectively  to  national  strength  and  prosperity. 
Each  country  was  extremely  jealous  of  all  other  countries ; 
each  wanted  to  be  strong  itself  and  wanted  all  others  to  be 
weak;  and  each  thought  that  what  was  one  nation's  loss 
was  sure  to  be  another  nation's  gain.  A  peculiar  feature 
of  the  mercantile  system  was  the  belief  that  wealth  con- 
sisted chiefly  of  precious  metals.  The  nation  which  had  the 
most  silver  and  gold  was  thought  to  be  the  richest  and 
most  prosperous.  It  was  considered  desirable  therefore  to 
sell  as  many  goods  as  possible  to  foreign  countries  and  to 
buy  very  little  from  them.  The  country  which  sold  much 
and  bought  little  would  eonstantl}^  increase  its  stock  of 
gold  and  silver.  One  reason  why  European  countries 
wanted  colonies  was  to  relieve  themselves  of  the  necessity 
of  purchasing  goods  from  rival  countries. 

Each  nation  protected  its  industries  to  the  fullest  possi- 
ble  extent.     England   protected   her   agriculture  by   high 

75 


76  ENGLISH  COLONIAL  POLICY 

tariff  duties  on  some  foodstuffs  and  by  the  exclusion  of 
others.  Manufacturers  were  protected  by  regulations 
which  forbade  the  exportation  of  raw  materials  and  the 
importation  of  finished  products.  In  1651  the  English 
Parliament  passed  the  famous  Navigation  Act,  the  pur- 
pose of  which  was  to  give  greater  protection  to  English 
shipping,  which  at  that  time  was  not  very  prosperous  be- 
cause of  the  active  competition  of  Dutch  shipowners.  One 
man  writing  of  this  time  said:  ''It  had  been  observed 
with  concern  that  the  merchants  of  England,  for  several 
years  past,  had  usually  freighted  Dutch  shipping  for 
fetching  home  their  own  merchandise,  because  the  freight 
was  at  a  lower  rate  than  that  of  English  ships.  The 
Dutch  shipping  were  therefore  made  use  of  even  for  im- 
porting our  own  American  products ;  whilst  our  own  ship- 
ping lay  rotting  in  our  harbors."  The  Dutch  were  out- 
stripping the  English  in  the  competitive  struggle  for  car- 
rying the  great  commerce  which  was  being  developed 
through  the  exploration  and  colonization  of  America, 
Africa  and  Asia.  The  Act  of  1651  was  intended  to  help 
English  shipping  interests  chiefly  at  the  expense  of  the 
Dutch. 

This  act  provided  that  all  goods  of  the  production  of 
Asia,  Africa  and  America  imported  into  England  must 
be  carried  in  English  owned  ships  of  which  the  master 
and  at  least  three-fourths  of  the  crew  were  English.  It 
also  said  that  such  goods  must  be  imported  directly  from 
the  place  of  production,  a  feature  of  the  law  which  pre- 
vented the  Dutch  from  carrying  the  goods  to  Dutch  ports 
and  sending  them  to  England  in  English  ships.  The  law 
further  provided  that  goods  produced  in  Europe  and  im- 
ported into  England  must  be  carried  either  in  English  ships 
or  in  the  ships  of  the  country  from  which  the  goods  were 
sent.  Dutch  vessels  could  not  carry  articles  from  Spain  or 
France  to   England.     The  law   also  excluded  all  foreign 


ENGLISH  COLONIAL  POLICY  77 

vessels  from  the  English  eoeistwise  trade,  and  forbade  the 
sale  in  England  of  fish  caught  in  foreign  fishing  vessels. 

The  purpose  of  this  law  was  to  protect  and  encourage 
English  shipping.  The  act  made  no  specific  reference  to 
English  colonial  trade  and  its  only  effect  on  the  colonies  in 
America  was  to  require  the  goods  which  they  sent  to 
England  to  be  shipped  in  English  vessels,  the  same  as 
goods  from  any  part  of  America  which  did  not  belong  to 
England.  This  law  did  not  forbid  the  colonists  to  sell 
their  products  where  they  chose  nor  to  buy  goods  where 
they  desired  to  buy.  Under  this  law  the  colonists  could 
employ  other  than  English  ships  in  any  of  their  commerce 
except  that  with  the  mother  country.  Parliament  did  not 
begin  to  apply  the  mercantile  system  in  full  to  the  colonies 
until  a  few  years  later. 

How  the  Mercantile  System  Applied  to  Colonies.  The 
application  of  the  mercantile  system  to  colonies  was  based 
upon  the  theory  that  colonies  were  planted  and  maintained 
only  to  promote  the  interests  of  the  mother  country.  It 
was  believed  that  colonial  industry  and  trade  should  exist 
primarily  for  the  purpose  of  contributing  to  the  wealth  of 
the  nation  to  which  the  colonies  belonged.  If  colonial  in- 
dustry and  trade  did  not  develop  naturally  in  such  a  way 
as  to  promote  the  interests  of  the  mother  country  then  it 
was  the  right,  and  even  the  duty,  of  the  mother  country  to 
direct  the  course  of  colonial  economic  activity  into  its 
proper  channels.  Colonizing  nations  naturally  desired 
that  their  colonies  should  be  prosperous,  but  the  prosperity 
should  not  be  of  a  nature  to  work  injury  to  the  mother 
country.     One  English  writer  said: 

"Colonies  ought  never  to  forget  what  they  owe  to 
their  mother  country  in  return  for  the  prosperity  and 
riches  they  enjoy.  Their  gratitude  in  that  respect,  and 
the  duty  they  owe,  indispensably  oblige  them  to  be  im- 
mediately dependent  on  their  original  parent,   and   to 


78  ENGLISH  COLONIAL  POLICY 

make  their  interest  subservient  thereunto.  The  effect 
of  that  interest,  and  of  that  dependency  will  be,  to 
procure  the  mother  country:  (1)  a  greater  consumption 
of  the  production  of  her  lands;  (2)  occupation  for  a 
greater  number  of  her  manufacturers,  artizans,  fisher- 
men and  seamen;  (3)  a  greater  quantity  of  such  com- 
modities as  she  wants;  (4)  a  greater  superfluity,  where- 
with to  supply  other  people. 

"From  the  end  of  the  establishment  of  colonies  re- 
sult two  kind  of  prohibitions.  First,  it  is  a  law 
founded  on  the  very  nature  of  colonies,  that  they  ought 
to  have  no  culture  of  arts,  wherein  to  rival  the  arts 
and  culture  of  their  parent  country.  For  which  reason, 
a  colony,  incapable  of  producing  any  other  commodities 
than  those  produced  by  its  mother  country,  would  be 
more  dangerous  than  useful :  it  would  be  proper  to 
call  home  its  inhabitants  and  give  it  up. 

"Secondly,  colonies  cannot  in  justice  consume  foreign 
commodities  with  an  equivalent  for  which  their  mother 
country  consents  to  supply  them;  nor  sell  to  foreigners 
such  of  their  own  commodities  as  their  mother  country 
consents  to  receive.  Every  infringement  of  those  laws 
is  a  real,  though,  too  common,  robbery  of  the  mother 
country's  labourers,  workmen  and  seamen,  in  order  to 
enrich  the  same  classes  of  men  belonging  to  rival  na- 
tions, who  will  sooner  or  later  take  advantage  of  it 
against  those  very  colonies." 

In  formulating  a  colonial  policy  the  English  lawmakers 
had  the  following  ends  in  view  with  regard  to  colonial 
economic  growth : 

1.  Industries  desired  by  the  mother  country  should  be 
encouraged  and  aided. 

2,  Industries  which  it  was  thought  might  injure  Eng- 
land should  be  forbidden. 

3.  English  merchants  should  have  the  first  right  to  buy 
any  colonial  product  which  they  desired  to  have. 

4,  English  merchants  should  have  the  first  right  to  sell 
to  the  colonists  the  goods  which  the  colonists  wanted. 


ENGLISH  COLONIAL  POLICY  79 

5.  All  articles  carried  to  and  from  the  colonies  should 
be  carried  in  English  vessels. 

This  program  was  worked  out  in  a  number  of  laws, 
the  first  important  one  being  enacted  in  1660.  Even  be- 
fore 1660  some  efforts  had  been  made  to  direct  colonial 
industry  and  trade.  King  James  and  King  Charles  I 
gave  instructions  to  colonial  authorities  not  to  trade  with 
foreigners.  James  wanted  to  put  an  end  to  tobacco  cul- 
ture in  Virginia.  After  it  had  been  decided  to  let  the 
Virginians  have  their  way,  they  were  ordered  to  send  all 
their  export  tobacco  to  England.  In  return  however  the 
colonial  tobacco  planters  were  given  a  monopoly  of  the 
English  market  by  means  of  laws  which  forbade  tobacco 
culture  in  England  and  placed  very  high  tariff  duties  on 
foreign  tobacco.  In  1650  a  law  was  passed  prohibiting 
foreign  vessels  from  trading  with  the  colonies  except  by 
special  license,  but  this  act  was  passed  primarily  for  the 
purpose  of  punishing  the  people  of  Virginia  and  Bermuda 
for  supporting  the  cause  of  King  Charles  I  during  the 
civil  war  in  England  (1642-49).  While  these  royal  or- 
ders and  early  statutes  clearly  indicated  the  trend  of  the 
colonial  policy,  the  important  legislation  did  not  come 
until  after  the  restoration  of  the  English  monarchy  in 
1660. 

The  Act  of  1660.  The  law  of  1660  repeated  the  provi- 
sions of  the  Act  of  1651  with  respect  to  the  protection  of 
English  shipping.  This  was  done  because  the  new  royal 
government  did  not  recognize  as  valid  the  acts  passed  by 
Parliament  during  the  time  of  Cromwell's  rule,  but  it 
wished  nevertheless  to  continue  the  shipping  policy  which 
the  Commonwealth  government  had  adopted. 

In  addition  to  continuing  the  important  features  of 
the  Act  of  1651  the  Act  of  1660  made  special  provisions 
for  the  regulation  of  colonial  trade.     It   stated  that   all 


80  ENGLISH  COLONIAL  POLICY 

commodities  exported  from  or  imported  into  the  English 
colonies  should  be  carried  in  ships  which  belonged  to  the 
people  of  England,  Ireland  or  Wales,  or  in  ships  which 
were  built  in  the  colonies  and  were  owned  by  the  colonists. 
The  shipowners  of  England  were  permitted  by  this  act  to 
use  in  colonial  trade  vessels  not  built  by  English  ship- 
builders, but  this  was  changed  two  years  later,  when  for 
the  protection  of  the  shipbuilders  the  colonial  trade  was 
confined  to  English  built  vessels,  including  vessels  built 
in  the  colonies. 

The  second  important  feature  of  the  act  of  1660  was  a 
section  carrying  into  effect  the  belief  that  English  mer- 
chants had  the  first  claim  on  any  colonial  commodities 
which  they  desired  to  have.  The  law  stated  that  all  sugar, 
tobacco,  cotton,  indigo,  ginger,  fustic  or  other  dyewoods 
exported  from  an  English  colony  should  be  sent  only  to 
England,  Ireland,  or  Wales,  or  to  some  other  English 
colony.  The  articles,  the  exportation  of  which  was  thus 
restricted,  became  known  as  the  "enumerated"  articles. 
The  list  was  increased  on  later  occasions,  molasses  and 
naval  stores  being  added  in  1704,  rice  in  1706,  copper, 
beaver  and  other  furs  in  1722.  However,  partial  relief 
was  given  from  the  operation  of  the  restriction  in  the 
case  of  rice  and  sugar.  The  production  of  these  two  arti- 
cles by  English  planters  became  too  large  to  be  absorbed 
by  the  English  markets.  The  cost  of  transshipment  by  way 
of  England  to  the  European  continent  was  great  enough  to 
prevent  the  successful  competition  of  the  English  planters 
in  the  markets  of  continental  Europe.  When  this  fact 
was  recognized  by  Parliament  it  enacted  laws  permitting 
rice  (1730)  and  sugar  (1739)  to  be  transported  from  the 
colonies  direct  to  any  part  of  Europe  south  of  Cape  Finis- 
terre.  Only  vessels  owned  in  England  could  engage  in 
this   trade   however;    colonial   vessels   were   permitted    to 


ENGLISH  COLONIAL  POLICY  81 

carry  sugar  and  rice  only  to  the  mother  country  or  between 
colonial  ports. 

Concerning  the  trade  in  articles  which  were  not 
"enumerated'*  Parliament  enacted  no  general  legislation 
until  1766.  The  colonists  were  free  to  sell  them,  with  a 
few  exceptions  to  be  mentioned  later,  wherever  they  could 
find  a  market.  However  not  all  the  articles  which  were 
not  enumerated  could  be  sold  in  England.  While  Parlia- 
ment did  not  pass  any  laws  specifically  excluding  colonial 
products  from  the  mother  country  the  laws  which  were 
enacted  to  protect  English  industries  against  outside  com- 
petition operated  against  colonial  products  just  as  against 
the  products  of  a  foreign  country.  The  most  important 
of  these  laws,  with  respect  to  the  effect  on  colonial  trade, 
were  the  laws  preventing  the  free  importation  of  certain 
food  stuffs  into  England.  The  landholding  and  farming 
interests  of  England  wanted  special  protection  just  as  the 
manufacturers  and  shipowners  did,  and  in  their  interest 
the  English  Corn  Laws  and  other  laws  of  a  similar  nature 
were  enacted.  Under  these  laws  the  New  England  colonies 
and  the  other  northern  colonies  could  not  send  their  most 
important  exports — fish,  wheat,  corn,  fl.our  and  meat — to 
England.  Articles  other  than  foodstuffs  could  however 
be  sent  to  the  mother  country. 

Method  of  Securing  Compliance  with  the  Law  of  1660. 
It  was  necessary  to  make  some  provision  to  prevent  the 
transportation  of  the  enumerated  articles  to  the  markets 
of  the  continent  of  Europe,  and  to  this  end  the  Act  of 
1660  stated  that  the  masters  of  vessels  should  be  placed 
under  bond  (£1,000  if  the  vessel  was  less  than  100  tons, 
£2,000  if  the  vessel  was  larger)  to  carry  to  a  legal  desti- 
nation any  enumerated  article  which  might  be  taken  on 
board.  The  bonds  were  to  be  given  in  such  a  manner 
that  vessels  of  the  mother  country  were  favored  in  the 


82  ENGLISH  COLONIAL  POLICY 

transatlantic  trade  while  colonial  shipping  was  favored  in 
the  intercolonial  trade.  This  was  brought  about  in  the 
following  way.  A  vessel  leaving  the  mother  country, 
bound  for  the  colonies,  was  required  to  give  bond  before 
sailing,  that  if  it  took  any  enumerated  articles  on  board 
they  should  be  brought  to  England,  Ireland  or  Wales.  A 
vessel  touching  a  colonial  port,  not  coming  directly  from 
the  mother  country,  was  required,  when  taking  on  enumer- 
ated articles,  to  give  bond  at  the  colonial  port  to  take  the 
articles  to  England  or  to  some  other  English  colonial  port. 
A  vessel  going  from  England  to  the  colonies  was  therefore 
legally  excluded  from  carrying  enumerated  articles  from 
one  colony  to  another.  The  law  tended  to  prevent  ves- 
sels of  the  mother  country  from  engaging  in  intercolonial 
trade,  and  it  likewise  tended  to  discourage  colonial  ship- 
owners from  sending  their  vessels  to  England.  To  have  a 
bond  canceled  it  was  necessary  for  the  master  of  the 
vessel  to  secure  a  certificate  from  the  port  authorities  where 
the  enumerated  articles  were  unloaded  and  present  it  at  the 
port  where  the  bond  was  given. 

The  Act  of  1663.  The  law  of  1663  was  enacted  to  give 
English  merchants  a  commanding  position  in  the  import 
trade  of  the  colonies.  Since  the  colonies  existed  primarily 
for  the  benefit  of  the  mother  country  it  was  thought  that 
the  colonists  should  not  buy  from  a  foreign  country  any- 
thing which  English  merchant<s  could  supply  them.  The 
law  stated  that  all  goods  of  European  production  imported 
into  the  colonies  must  be  laden  and  shipped  in  England 
or  Wales  and  carried  directly  to  the  colonies.  The  only 
exceptions  were  salt  for  the  New  England  fisheries  (and 
later  for  the  fisheries  of  New  York  and  Pennsylvania), 
wines  from  the  Madeira  and  Azores^  Islands,  and  servants, 
food  and  horses  from  Ireland  and  Scotland.  Salt  for  the 
fisheries  was  the  only  article  of  European  production  which 
the  colonists  could  buy  wherever  they  chose.     It  must  be 


ENGLISH  COLONIAL  POLICY  83 

noted  that  this  law  applied  only  to  products  of  European 
origin.  It  placed  no  restrictions  on  trade  in  the  products 
of  foreign  colonies  in  America, 

The  Act  of  1673.  Though  the  colonists  did  not  deny 
the  right  of  Parliament  to  make  such  regulations  as  those 
contained  in  the  laws  of  1660  and  1663,  they  did  not  take 
kindly  to  the  restrictive  measures  and  forthwith  began  to 
disobey  them,  carrying  enumerated  commodities  such  as 
sugar  and  tobacco  directly  to  the  countries  of  continental 
Europe  and  buying  from  those  countries  many  articles  be- 
sides salt  for  the  New  England  fisheries.  English  mer- 
chants were  quick  to  complain  about  the  loss  of  profits 
which  they  thought  to  be  rightly  theirs.  In  the  illegal 
sale  of  enumerated  commodities  in  the  ports  of  continental 
Europe  the  colonists  could  make  lower  prices  than  the 
English  merchants  because  when  the  articles  passed 
through  England  they  had  to  bear  transshipment  charges 
as  well  as  small  taxes.  To  meet  the  situation  created  by 
the  violation  of  the  law  Parliament  enacted  a  measure  in 
1673  which  imposed  an  export  tax  on  enumerated  articles 
shipped  from  any  colony  to  another.  These  export  taxes 
were  equal  in  amount  to  the  import  taxes  levied  on  the 
same  articles  when  shipped  to  England.  The  taxes  tended 
to  equalize  prices  which  the  colonial  merchant  could  charge 
with  the  prices  of  the  English  merchant,  and  thereby  dis- 
couraged attempts  on  the  part  of  the  colonists  to  ship 
enumerated  articles  to  illegal  destinations  in  Europe.  The 
law  also  had  the  effect  of  raising  the  price  of  sugar  and 
other  enumerated  articles  to  the  colonial  consumers  but  this 
was  thought  in  England  to  be  no  more  than  a  proper  pun- 
ishment for  past  violations  of  the  law. 

The  Act  of  1696.  Some  of  the  colonists  interpreted  the 
law  of  1673  to  mean  that  once  they  had  paid  the  export 
taxes  on  enumerated  goods  they  had  the  right  to  send  them 
wherever  they  chose.     That  is,  they  thought  the  act  of  1673 


84  ENGLISH  COLONIAL  POLICY 

virtually  repealed  that  section  of  the  act  of  1660  with  re- 
spect to  the  enumerated  articles.  The  English  Attorney- 
General  said  that  the  law  of  1673  made  no  change  in  the 
act  of  1660,  and  that  regardless  of  the  payment  of  the 
export  taxes  the  colonial  merchant  could  legally  send 
enumerated  articles  only  to  the  mother  country  or  to  an- 
other colony.  Because  of  the  misunderstanding  about  this 
matter  another  law  was  enacted  in  1696  which  stated  in 
definite  terms  the  substance  of  the  Attorney-General's 
opinion.  This  act  also  made  better  provision  for  the  en- 
forcement of  all  the  acts  for  the  regulation  of  colonial  trade 
by  creating  a  new  official  machinery  for  their  adminis- 
tration. 

Restrictions  on  Colonial  Industries.  The  people  of 
England  did  not  want  the  colonists  to  have  industries  which 
it  was  thought  would  have  an  injurious  effect  on  the  trade 
and  industry  of  the  mother  country.  One  of  the  purposes 
of  establishing  colonies  was  to  create  a  market  for  English 
manufactures  and  particularly  for  manufactures  of 
wool.  The  early  home  manufactures  of  the  New  England 
and  other  northern  colonies  eventually  expanded  to  such 
an  extent  that  by  the  end  of  the  seventeenth  century  the 
northern  colonists  not  only  were  supplying  a  part  of  their 
own  needs  for  woolens  but  were  also  selling  woolens  to 
the  people  of  the  other  colonies.  When  this  became  known 
in  England  the  woolen  manufacturers  protested.  In 
answer  to  their  protests  Parliament  passed  a  law  in  1699 
forbidding  the  people  of  any  colony  to  export  woolen  yarn, 
woolen  cloth  or  any  manufactures  of  wool  either  to  an- 
other colony  or  to  a  foreign  country.  Each  colony  was 
permitted  to  produce  vioolens  for  itself  but  it  was  not  to 
compete  with  English  manufacturers  in  selling  to  others. 

In  1732,  because  of  complaints  of  English  hat  manu- 
facturers, Parliament  imposed  the  same  restrictions  on  the 


ENGLISH  COLONIAL  POLICY  85 

exportation  of  hats  from  the  colonies  that  had  been  placed 
upon  the  exportation  of  woolens,  and  to  restrict  still  fur- 
ther the  colonial  hat-making  industry  each  master  hat- 
maker  was  forbidden  to  have  more  than  two  apprentices; 
and  each  apprentice  was  required  to  serve  his  master  seven 
years. 

In  1750  Parliament  enacted  a  law  to  restrict  the  devel- 
opment of  iron  manufactures  in  the  colonies.  The  mother 
country  desired  the  opening  of  iron  mines  in  her  American 
colonies,  and  the  production  of  pig  iron  and  bar  iron  was 
encouraged.  But  since  the  manufacture  of  iron  into 
finished  products  would  create  competition  with  English 
manufacturers  the  law  provided  that  no  rolling  mills,  slit- 
ting mill,  plating  forge  or  steel  furnace  should  be  erected 
or  operated  in  the  colonies. 

Encouragements  of  Colonial  Industry  and  Trade.  In 
order  to  bring  about  the  development  of  desirable  colonial 
industries  Parliament  frequently  gave  inducements  in  the 
way  of  bounties  and  special  privileges.  England  wanted 
to  become  independent  of  foreign  nations  for  her  supply  of 
naval  stores,  and  to  encourage  the  production  of  those  arti- 
cles in  the  colonies  a  law  was  passed  in  1706  providing  for 
the  payment  of  substantial  bounties  upon  all  masts,  tar, 
rosin,  turpentine  and  hemp  shipped  from  the  colonies  to 
the  mother  country.  A  bounty  was  also  given  on  colonial 
indigo. 

Another  way  in  which  Parliament  favored  colonial  in- 
dustry and  trade  was  by  granting  preferential  import 
duties  upon  certain  colonial  products.  A  considerable 
number  of  articles  imported  into  England  from  the  colo- 
nies were  taxed  at  a  lower  rate  than  similar  articles  from 
foreign  countries.  The  preferential  treatment  given  to 
colonial  tobacco  was  sufficient  to  exclude  virtually  all  for- 
eign tobacco  from  England.     Moreover  the  law  forbidding 


86  ENGLISH  COLONIAL  POLICY 

tobacco  culture  in  England  was  strictly  enforced.  Prefer- 
ential tariff  duties  were  granted  on  whale  oil,  silk,  pot  and 
pearl  ashes,  iron  and  molasses. 

Though  the  colonists  were  compelled  by  law  to  pur- 
chase virtually  all  their  European  imports  in  England, 
the  mother  country  taxed  but  lightly  the  articles  which 
were  produced  originally  in  the  countries  of  continental 
Europe.  The  full  import  duty  was  charged  when  the 
articles  entered  England,  but  if  they  were  subsequently 
shipped  to  the  colonies  virtually  all  the  duty  was  returned. 
These  "drawbacks"  made  it  possible  often  for  the  colonists 
to  buy  goods  manufactured  on  the  continent  more  cheaply 
than  the  people  of  England  could  buy  them.  A  system  of 
drawbacks  was  also  in  effect  upon  colonial  products  re- 
exported from  England  to  some  foreign  country,  so  that 
colonial  producers  were  not  placed  at  a  great  disadvantage 
in  competition  with  others. 

The  English  shipping  policy  gave  complete  protection 
to  the  shipbuilding  and  navigating  interests  of  the  colonies. 
Foreign  ships  were  excluded  from  colonial  trade ;  the  com- 
merce of  the  English  possessions  in  America  was  carried 
on  entirely  by  the  ships  of  the  mother  country  or  of  the 
colonies  themselves.  Colonial  shipping  secured  a  virtual 
monopoly  of  the  intercolonial  trade.  English  shipping  in- 
terests asked  from  time  to  time  that  the  development  of 
colonial  shipping  be  restricted  by  law,  but  that  was  not 
done.  The  growth  of  the  English  empire  demanded 
strength  upon  the  sea,  and  political  considerations  took 
precedence  over  the  selfish  desires  of  the  shipbuilders  and 
shipowners  of  the  mother  country. 

The  Molasses  Act  of  1733.  In  only  one  act  of  legisla- 
tion previous  to  1764  did  the  English  Parliament  treat  the 
colonies  in  a  grossly  unfair  manner.  This  occurred  with 
the  passage  of  the  Molasses  Act  in  1733,  a  law  which  rep- 


ENGLISH  COLONIAL  POLICY  87 

resented  an  effort  to  discriminate  against  one  group  of 
colonies  for  the  purpose  of  aiding  another  group. 

After  the  enumeration  of  sugar  in  1660  the  English 
sugar  planters  in  the  West  Indies  were  placed  at  a  disad- 
vantage in  disposing  of  their  sugar.  England  could  not 
consume  all  the  sugar  which  they  sent  and  when  it  was 
transshipped  to  the  continental  markets  the  price  estab- 
lished by  the  sale  of  sugar  shipped  directly  from  the 
French,  Spanish  and  Dutch  sugar  islands  was  so  low  that 
there  was  no  profit  left  for  the  English  planters.  While 
the  planters  were  suffering  losses  in  the  competitive  strug- 
gle the  English  colonists  on  the  American  continent  were 
buying  much  of  their  sugar,  molasses  and  rum  from  the 
non-English  West  Indian  colonies.  Rum  and  molasses 
were  both  sold  cheaply  in  the  French  West  Indies  because 
the  French  government  did  not  permit  rum  to  be  sent  to 
France  where  it  might  harm  the  brandy  manufacturing  in- 
dustry. It  was  suggested  to  Parliament  that  the  English 
sugar  planters  would  be  helped  if  the  continental  colonies 
should  be  required  to  buy  their  sugar,  rum  and  molasses  in 
the  English  sugar  islands.  Acting  on  this  suggestion 
Parliament  passed  the  Molasses  Act,  which  imposed  duties 
of  six  pence  a  gallon,  nine  pence  a  gallon  and  five  shillings 
a  hundredweight  respectively  upon  the  molasses,  rum  and 
sugar  imported  into  the  American  continental  colonies 
from  any  non-English  colony. 

This  unfair  law  brought  forth  a  vigorous  protest  from 
the  colonists  of  the  continent.  It  was  shown  that  the 
English  sugar  colonies  did  not  produce  enough  molasses  to 
meet  the  demand  of  the  continental  colonies.  Moreover 
the  continental  colonies,  particularly  those  of  New  England, 
had  one  of  their  leading  export  markets  in  the  foreign  West 
Indies.  If  they  were  prevented  from  buying  the  products 
of  these  islands  they  would  no  longer  be  able  to  sell  to 


88  ENGLISH  COLONIAL  POLICY 

them,  and  the  industries  and  trade  of  the  continental  colo- 
nies would  be  greatly  harmed.  With  their  prosperity  de- 
stroyed, it  was  pointed  out,  it  would  be  impossible  for  them 
to  make  their  customary  purchases  from  England,  and  the 
English  merchants  too  would  suffer  loss  because  of  this 
bad  law. 

Fortunately  the  Molasses  Act,  in  its  original  form,  was 
never  enforced.  The  English  sugar  planters  secured  the 
relief  needed  when  in  1739  Parliament  passed  the  law 
permitting  the  exportation  of  sugar  directly  to  Southern 
Europe.  Later  the  English  government  tried  to  enforce 
the  Molasses  Act.  The  attempt  marked  the  beginning  of 
a  quarrel  between  the  colonies  and  the  mother  country,  a 
quarrel  which  was  to  end  with  the  War  for  Independence. 
This  phase  of  England's  colonial  policy  will  be  taken  up  in 
a  later  chapter. 

Influence  and  Efifect  of  England's  Colonial  Policy.  It 
has  often  been  said  that  England's  colonial  policy  was  from 
the  beginning  harsh  and  burdensome,  and  that  the  colonies 
were  ground  down  for  generations  under  England's  heel 
until  they  finally  were  driven  to  rebellion.  As  a 
matter  of  fact  England's  policy,  previous  to  1764,  was  not 
harsh,  and,  compared  to  the  colonial  policies  of  other 
countries  at  that  time,  it  was  extremely  liberal. 

The  regulatory  acts  passed  between  1660  and  1764,  with 
the  exception  of  the  Molasses  Act  (which  was  not  en- 
forced) imposed  no  undue  hardships  on  the  colonists,  and 
for  every  restriction  which  they  contained  there  were  ample 
compensatory  advantages. 

Tobacco  and  rice  were  the  most  important  "enumer- 
ated" commodities  produced  in  the  continental  colonies. 
The  tobacco  planters  received  a  monopoly  of  the  English 
market.  After  1730  the  rice  planters  could  send  their  rice 
directly  to  points  south  of  Cape  Finisterre. 

The   restrictions   imposed   upon   the   manufacturers  of 


ENGLISH  COLONIAL  POLICY  89 

woolens,  hats  and  articles  of  iron  were  of  no  vital  signifi- 
cance because  the  colonies  were  primarily  agricultural  and 
in  no  event  would  have  developed  manufacturing  to  any 
great  extent.  Moreover  the  provisions  of  the  laws  regu- 
lating these  industries  were  never  rigorously  enforced. 

The  act  requiring  the  colonists  to  purchase  European 
products  in  England  likewise  worked  little  hardship  be- 
cause after  all  England  was  the  natural  source  of  supply 
of  virtually  all  the  European  goods  which  they  desired. 
Even  had  this  law  not  been  passed  England  would  have 
supplied  most  of  their  wants. 

IMuch  has  been  said  about  the  evasion  and  violation  of 
the  acts  for  the  regulation  of  colonial  trade.  Unquestion- 
ably the  colonists  disobeyed  these  laws  when  they  desired 
to  do  so,  and  for  many  years  the  English  government  did 
not  endeavor  to  enforce  them  with  strictness.  However 
the  evasions  were  probably  not  extensive  because  colonial 
industry  and  trade  naturally  took  the  direction  which  the 
laws  marked  out.  The  laws  were  by  no  means  the  chief 
influence  in  determining  the  nature  of  the  economic  de- 
velopment of  the  colonies. 

Questions  and  Topics 

1.  What  causes  have  contributed  to  a  strong  inter- 
national feeling  in  the  20th  century  as  opposed  to  the 
extreme  national  selfishness  of  the  17th  century  ? 

2.  Do  you  know  of  any  modern  regulations  of  com- 
merce comparable  to  the  mercantile  system? 

3.  Do  you  think  the  colonies  prospered  more  or  less  as  a 
result  of  the  English  restrictions  on  trade? 

4.  In  what  respect  do  your  own  ideas  of  the  purpose  of 
a  colony  differ  from  those  of  the  English  writer  quoted  in 
this  chapter? 

5.  "What  is  your  own  idea  of  the  purpose  of  a  colony  and 
the  rights  of  the  colonists? 

6.  Why  did  not  the  trade  regulations  imposed  upon  the 
colonists  before  1764  cause  them  openly  to  revolt? 


CHAPTER  VI 
COLONIAL  DEVELOPMENT,  1660-1763 

Population.  The  century  following  1660  witnessed  no 
change  in  the  fundamental  character  of  colonial  industry 
and  commerce.  The  methods  of  production,  the  tools  and 
equipment  of  industry,  and  the  variety  of  resources  used 
were  virtually  the  same  in  1760  as  in  1660.  Significant 
changes  in  economic  organization  and  activity  did  not  be- 
gin to  occur  until  late  in  the  eighteenth  century  when  new 
mechanical  devices  began  to  work  a  transformation  of  in- 
dustry throughout  the  civilized  world. 

With  few  changes  in  industrial  methods,  the  economic 
progress  of  the  colonies  depended  mainly  upon  the  increase 
in  the  number  of  inhabitants  to  work  in  field  and  forest 
and  upon  the  sea.  Development  was  quantitative  rather 
than  qualitative  and  the  chief  factor  in  productive  capacity 
was  the  growth  of  population.  There  was  throughout  the 
century  a  steady  flow  of  immigration,  and  the  birth  rate 
among  colonial  families  was  high.  By  1760  virtually  the 
entire  coast  from  the  Penobscot  River  in  Maine  to  the  St.' 
Mary's  in  Florida  was  occupied.  In  New  England  and  in 
the  Middle  Colonies  the  settled  regions  extended  to  the 
crest  of  the  Appalachian  highland,  and  even  beyond  the 
crest  in  the  valleys  of  the  Mohawk  and  Potomac  Rivers. 
The  Carolinas,  Pennsylvania,  and  Georgia  were  settled 
during  this  period.  When  the  pioneers  going  in  advance 
of  the  English  settlements  came  into  contact  with  the 
French,  working  their  way  southward  from  the  Great 
Lakes,  a  contest  for  control  of  the  great  interior  valley 

90 


COLONIAL  INDUSTRY,  1660-1763  91 

ensued,  resulting  in  the  extension  of  English  dominion  to 
the  banks  of  the  Mississippi. 

It  is  estimated  that  in  1760  the  population  of  the  thir- 
teen colonies  was  1,596,000.  Of  this  number  473,000  lived 
in  New  England,  405,000  in  the  Middle  Colonies,  and 
718,000  in  the  southern  group.  There  were  386,000 
negroes  in  the  colonies,  of  whom  only  87,000  lived  north  of 
Maryland.  In  South  Carolina,  with  a  total  population  of 
100,000,  the  black  race  outnumbered  the  white  more  than 
two  to  one,  and  in  Virginia,  the  most  populous  single 
colony,  the  number  of  negroes  was  only  slightly  less  than 
the  number  of  white  people.  While  the  white  popula- 
tion was  overwhelmingly  of  English  origin,  there  was, 
particularly  after  the  beginning  of  the  eighteenth  century, 
a  constantly  increasing  proportion  of  ''foreigners." 
French,  German,  Scotch,  and  Irish  settlers  came  to 
America  in  large  numbers.  They  were  scattered  through- 
out all  the  colonies,  though  here  and  there  they  organized 
communities  of  their  own,  good  examples  of  such  com- 
munities being  the  German  and  Welsh  settlements  in 
Pennsylvania. 

General  Character  of  Colonial  Industry.  In  Chapter 
IV  it  was  pointed  out  how  New  England  and  Virginia  dif- 
fered sharply  in  their  early  economic  development.  The 
contrast  between  these  two  sections  was  typical  of  the 
contrast  between  the  northern  and  southern  groups  of 
colonies.  In  the  South  agriculture  remained  the  sole  in- 
dustry of  importance,  except  in  North  Carolina,  where  con- 
siderable effort  was  given  to  the  production  of  lumber  and 
naval,  stores.  Large  plantations  and  slave  labor  were  the 
main .  characteristics  of  the  southern  agricultural  system. 
All  the  southern  colonies  raised  sufficient  grain  for  their 
own  use.  In  Virginia,  Maryland  and  North  Carolina 
tobacco  was  the  leading  agricultural  product,  while  in 
South   Carolina   and   Georgia  rice   and   indigo   were   the 


92  COLONIAL  INDUSTRY,  1660-1763 

chief  articles  raised  for  export.  ^Maryland,  lying  between 
the  North  and  the  South,  had  a  substantial  shipbuilding 
and  commercial  center  at  Baltimore,  and  displayed  a 
slightly  greater  diversity  of  industry  than  her  sister  col- 
onies of  the  South. 

In  the  Middle  Colonies,  New  York,  New  Jersey,  Pennsyl- 
vania and  Delaware,  the  farms  were  comparatively  small, 
and  the  chief  agricultural  product  was  grain.  Large 
quantities  of  corn,  oats,  rye,  wheat,  barley  and  buckwheat 
were  raised  for  home  use  and  for  export.  Many  people 
in  these  colonies  engaged  in  commerce,  owning  and  navi- 
gating ships  in  which  they  carried  their  products  to  dis- 
tant markets  and  brought  to  America  the  commodities  of 
other  lands.  Towns  and  villages  were  more  numerous  and 
more  populous  than  in  the  South ;  shipbuilding,  lumbering 
and  manufacturing  claimed  the  attention  of  a  great  many 
people.  In  New  England  the  farm  products  were  the 
same  as  those  of  the  middle  colonies,  though  the  quantity 
was  not  nearly  so  large.  Shipbuilding,  fishing,  lumbering, 
manufacturing  and  commerce  were  more  actively  pur- 
sued in  New  England  than  elsewhere. 

Colonial  Agriculture.  Most  of  the  colonists  who  landed 
on  the  shores  of  America  became  farmers.  Farming  of- 
fered the  easiest  and  surest  road  to  economic  independence 
because  it  was  possible  to  start  with  little  or  no  capital, 
and  the  rewards  to  industry  were  certain.  One  early 
writer   on   colonial   agriculture   said, 

"It  is  common  to  see  men  demand  and  have  grants 
of  land,  who  have  no  substance  to  fix  themselves  further 
than  the  cash  for  the  fees  of  taking  up  the  land,  a  gun, 
some  powder  and  shot,  a  few  tools  and  a  plow ;  they 
maintain  themselves  the  first  year,  like  the  Indians, 
with  their  guns  and  nets;  and  afterwards  by  the  same 
means  with  the  assistance  of  their  lands;  the  labor  of 
their  farms  they  perform  themselves  even  to  being  their 
own  carpenters  and  smiths;  by  this  means  people,  who 


COLONIAL  INDUSTRY,  1660-1763  93 

may  be  said  to  have  no  fortune,  are  enabled  to  live,  and 
in  a  few  years  to  maintain  themselves  and  families  com- 
fortably." 

While  newcomers  and  persons  of  wandering  inclination, 
who  because  of  an  unwillingness  to  be  "crowded"  moved 
toward  the  wilderness  whenever  neighbors  became  numer- 
ous, were  forced  to  undergo  the  many  hardships  of  frontier 
life,  the  inhabitants  who  "fixed"  themselves  were  able 
not  only  to  live  in  comfort  but  to  enjoy  actual  luxury. 
Though  writing  of  a  somewhat  later  date  than  1760,  Wash- 
ington Irving  gave  a  description  of  the  typical  comforts  of 
colonial  farm  life  when  he  pictured  the 

"ample  charms  of  a  genuine  Dutch  country  tea-table 
in  the  sumptuous  time  of  autumn.  Such  heaped  up 
platters  of  various  and  almost  indescribable  kinds, 
known  only  to  experienced  Dutch  housewives.  There  was 
the  doughty  dough-nut,  the  tenderer  oly  koek,  and  the 
crisp  and  crumbling  cruller ;  sweet-cakes  and  short- 
cakes and  honey-cakes,  and  the  whole  family  of  cakes. 
And  then  there  were  apple-pies  and  peach-pies  and 
pumpkin-pies;  besides  slices  of  ham  and  smoked  beef; 
and  moreover  delectable  dishes  of  preserved  plums, 
peaches,  and  pears  and  quinces;  not  to  mention  broiled 
shad  and  roasted  chickens ;  together  with  bowls  of  milk 
and  cream,  all  higgledy-piggledy,  pretty  much  as  I 
have  enumerated  them,  with  the  motherly  tea-pot  send- 
ing up  its  clouds  of  vapor  from  the  midst." 

With  their  great  abundance  it  was  not  surprising  that 
the  colonists  carried  on  agriculture  in  a  wasteful  man- 
ner. What  was  the  need  of  being  careful  about  the  soil 
when  there  was  so  much  more  land  than  could  be  used? 
They  cut  down  the  forests  and  burned  the  trees;  cropped 
the  land  until  it  lost  its  fertility,  after  which  they  used 
it  for  pasture  and  raised  their  crops  on  new  ground. 
Cattle,  horses  and  hogs  received  little  care,  and  though  in- 
creasing greatly  in  numbers  they  deteriorated  in  quality. 


94  COLONIAL  INDUSTRY,  1660-1763 

In  1730  an  unusually  severe  winter  caused  the  loss  of 
10,000  cattle  in  South  Carolina,  but  said  the  writer  who 
told  of  the  loss,  "the  people  will  not  change  their  conduct.'* 
European  travelers  who  visited  America  during  the  colonial 
period  and  wrote  of  their  experiences  seldom  failed  to 
speak  of  the  wasteful  and  extravagant  methods  of  agricul- 
ture which  they  found  wherever  they  went.  "Their  eyes" 
said  one  keen  observer  of  the  colonists,  "are  fixed  upon  the 
present  gain,  and  they  are  blind  to  futurity." 

Fishing.  Fishing  ranked  next  to  agriculture  among 
colonial  industries.  In  all  the  colonies  large  quantities  of 
fish  were  taken  for  home  use  by  people  living  near  the 
shore,  and  for  negroes  and  the  poorer  white  people  fish 
formed  a  staple  article  of  diet  the  year  around.  In  the 
South  fishing  was  one  of  the  many  minor  activities  which 
formed  a  part  of  plantation  economy.  In  the  Middle 
Colonies  the  wonderful  spring  runs  of  shad  and  alewives 
in  the  rivers  and  the  oyster  beds  along  the  coast  yielded 
much  cheap  and  wholesome  food.  Pearl  Street,  New 
York,  received  its  name,  during  the  period  of  Dutch  occu- 
pancy, from  the  fact  that  it  was  paved  with  oyster  shells. 

It  was  only  in  New  England  however  that  the  fisheries 
were  developed  on  a  large  scale.  In  this  section  fishing 
competed  with  agriculture  for  first  place  among  the 
economic  activities  of  the  people.  Marblehead,  Gloucester, 
Nantucket,  Salem,  Boston,  in  fact  all  the  seaports  of  New 
England  had  their  fleets  of  small  vessels  bringing  in  cod, 
mackerel,  herring,  halibut,  sturgeon  and  other  varieties  of 
deep-sea  fish.  The  industry  not  only  produced  food  for  home 
use  and  for  export  but  was  also  a  wonderful  "nursery  for 
seamen,"  seamen  who  were  without  equal  in  the  world  for 
courage,  skill  and  powers  of  endurance.  At  first  the  fish- 
ermen limited  their  operations  to  the  fishing  grounds  in 
the  Gulf  of  Maine,  but  as  the  business  expanded  they  went 
farther  and  farther  from  home,  to  the  coast  of  Nova  Scotia 


COLONIAL  INDUSTRY,  1660-1763  95 

and  the  Gulf  of  St.  Lawrence,  to  the  Grand  Bank  of  New- 
foundland, the  principal  codfishery  in  American  waters. 

Though  the  New  England  fishing  industry  grew  con- 
stantly it  was  hampered  by  the  enmity  of  the  French  who 
claimed  exclusive  control  of  the  fishing  grounds  along  the 
coasts  of  Nova  Scotia  and  Newfoundland.  The  French 
frequently  seized  and  confiscated  New  England  fishing 
vessels  in  these  waters,  and  they  incited  the  Indians  to 
attack  the  New  England  fishermen  who  went  ashore  on  the 
Maine  coast  to  obtain  firewood.  The  New  Englanders 
welcomed  the  struggle  between  France  and  England  for 
the  control  of  the  American  continent,  and  each  time  war 
broke  out  the  sturdy  colonists  sent  armed  expeditions 
against  the  French.  It  was  due  to  the  efforts  of  the 
New  Englanders  that  Nova  Scotia  was  captured  in  1690 
and  again  in  1710.  In  1744,  when  war  broke  out  a  third 
time,  William  Pepperell,  with  a  small  force  composed 
largely  of  New  England  fishermen,  captured  the  strongly 
fortified  city  of  Louisbourg  on  Cape  Breton  Island,  an  ex- 
ploit which  was  one  of  the  most  remarkable  military  events 
of  colonial  history.  His  act  had  no  substantial  results 
however,  for  once  more  England  restored  the  territory 
which  the  colonists  had  taken  from  their  unfriendly  neigh- 
bors. The  final  French  and  Indian  War  (1754-1763) 
found  the  New  Englanders  once  more  eagerly  striving  to 
expel  the  French;  and  they  had  a  leading  part  in  the 
struggle  by  which  England  gained  an  empire  from  her 
ancient  rival. 

Notwithstanding  the  interruptions  and  losses  due  to  the 
frequent  wars  with  the  French,  the  New  England  fisheries 
had  a  remarkable  growth.  Barely  established  in  1635, 
they  gave  employment  in  1765  to  nearly  700  vessels  and 
10,000  seamen,  and  yielded  an  annual  product  of  approxi- 
mately $2,000,000  in  value.  So  vital  was  the  codfish  to 
New   England  prosperity   that   the  legislature  of  ^lassa- 


96  COLONIAL  INDUSTRY,  1660-1763 

chusetts  voted  to  "hang  a  representation  of  a  codfish  in 
the  room  where  the  House  sit,  as  a  memorial  of  the  im- 
portance of  the  codfishery  to  the  welfare  of  this  Common- 
wealth," a  custom  which  is  followed  to  the  present  day. 

Of  equal  interest  with  the  growth  of  the  codfishery  was 
the  development  of  whaling.  The  oil  and  bone  of  whales 
were  the  basis  of  a  valuable  European  industry  even  be- 
fore the  settlement  of  America,  and  one  of  the  resources  of 
New  England  frequently  mentioned  by  early  writers  was 
the  whales  seen  along  the  coast.  Richard  Mather,  who 
came  to  Massachusetts  in  1635,  told  of  seeing  "mighty 
whales  spewing  up  water  like  the  smoke  of  a  chimney,  of 
such  incredible  bigness  that  I  will  never  wonder  that  the 
body  of  Jonah  could  be  in  the  belly  of  a  whale."  The 
first  stage  in  the  development  of  the  whale  fishery  consisted 
of  using  the  occasional  drift  whales  cast  ashore  by  the  sea. 
The  second  stage  of  development  was  soon  reached.  High 
masts  or  scaffolds  erected  on  the  beach  supported  platforms 
from  which  observers  watched  for  the  appearance  of  whales. 
"When  one  was  seen  the  fishermen  put  out  in  small  boats, 
made  their  kill,  and  towed  the  carcass  ashore  to  be  cut  up 
and  the  oil  and  bone  extracted.  By  the  end  of  the  seven- 
teenth century  deep  sea  whaling  was  established.  In  1736 
whaling  vessels  from  Provincetown  went  as  far  north  as 
Davis  Straits  in  search  of  whales.  The  field  of  operation 
was  extended  until  by  1760  the  colonial  whalers  frequented 
all  the  known  whaling  grounds  of  the  North  Atlantic  Ocean, 
Nantucket  was  at  this  time  the  chief  center  of  the  industry, 
with  a  fleet  of  sixty  vessels. 

Other  Extractive  Industries.  The  natural  resource  of 
greatest  commercial  value,  next  to  the  fertile  soil  and  the 
fisheries,  was  the  great  forests  which  covered  the  Atlantic 
slope.  Sawed  lumber,  masts  and  timbers  for  ships, 
shingles,  clapboards,  staves,  heading  and  hoops  were  pro- 


COLONIAL  INDUSTRY,  1660-1763  97 

duced  in  huge  quantities.  West  Indian  sugar  planters 
built  their  homes  of  frames  sawed  and  fitted  in  New  Eng- 
land, and  shipped  their  sugar  and  molasses  in  barrels  and 
hogsheads  made  of  American  materials.  English  woolen 
manufacturers  bleached  their  cloth  with  pot  and  pearl 
ashes  from  America;  English  shipbuilders  obtained  a  large 
part  of  their  timbers  and  naval  stores  from  American  for- 
ests. Vessels  of  the  royal  navy  were  equipped  with  masts 
which  had  been  American  pine  trees,  and  so  much  did  the 
English  government  think  of  this  source  of  supply  that 
agents  of  the  king  went  through  the  forests  marking  with 
a  broad  arrow  the  trees  suitable  for  masts.  These  trees 
the  colonists  were  forbidden  to  cut  for  their  own  use. 

The  chief  mineral  resource  of  the  colonies  was  iron. 
Copper  was  discovered  in  several  colonies,  but  was  found  in 
workable  quantities  only  in  Connecticut.  Iron  ore  deposits 
were  worked  in  all  the  Middle  Colonies,  in  Massachusetts, 
Connecticut  and  Rhode  Island,  in  Virginia  and  Maryland. 

Another  natural  resource  which  contributed  largely  to 
colonial  wealth  was  furs  and  skins.  These  articles  took 
high  rank  among  American  exports  throughout  the  colo- 
nial period.  Though  the  settlement  of  the  country  near  the 
coast  was  soon  followed  by  the  decrease  of  wild  animals 
in  that  region,  hunters,  trappers,  and  traders  moved  west- 
ward to  the  Appalachian  highland  and  then  across  the 
mountains  in  search  of  furs  and  peltry.  Traders  of  South 
Carolina  and  Georgia  bought  skins  of  deer  and  other  ani- 
mals from  the  Indian  tribes  living  on  the  banks  of  the 
Mississippi.  The  fur  trading  post  usually  marked  the 
location  of  a  later  settlement;  it  was  the  outpost  of  the 
white  man's  advance. 

Shipbuilding.  In  shipbuilding,  as  in  fishing  and  com- 
mercial activity,  New  England  led  the  other  groups  of  col- 
onies, but  she  did  not  have  so  nearly  a  complete  monopoly 


98  COLONIAL  INDUSTRY,  1660-1763 

of  shipbuilding  as  of  the  fishing  industry.  New  York, 
Pennsylvania,  and  INIaryland  had  busy  shipyards,  and  in 
Virginia  and  the  Carolinas  some  shipping  was  constructed 
during  the  latter  part  of  the  colonial  period.  All  kinds  of 
vessels,  both  large  and  small,  were  built  in  colonial  yards. 
A  favorite  type  for  fishing  and  also  for  oversea  trade  was 
the  schooner,  a  type  designed  by  Captain  Andrew  Robin- 
son, a  Gloucester  fisherman,  in  1713.  Up  to  that  time  the 
square  rig  was  favored  for  all  vessels  with  more  than  one 
mast.  Captain  Robinson  built  a  two-masted  vessel  with  a 
fore-and-aft  rigging  that  could  be  easily  handled  from  the 
deck.  When  he  launched  his  first  vessel,  a  bystander  ex- 
claimed, "Oh,  how  she  scoons,"  whereupon  the  designer 
responded,  "A  schooner  let  her  be."  The  schooner  could 
sail  "closer  to  the  wind"  than  a  square-rigged  vessel,  and 
its  course  could  be  more  easily  controlled. 

Exact  information  as  to  the  progress  of  colonial  ship- 
building is  not  available,  but  enough  is  known  to  show 
that  the  growth  of  the  business  compared  favorably  with 
the  advance  of  other  leading  industries.  By  1676  Massa- 
chusetts colonists  had  built  730  vessels,  of  which  30  were 
from  100  to  250  tons,  and  400  from  30  to  100  tons  each. 
In  1769  a  survey  of  shipbuilding  in  the  colonies  showed  the 
number  and  tonnage  of  vessels  built  that  year  to  be  as 
follows : 

Square-rigged     Sloops  and 

Colony  Vessels         Schooners  Tonnage 

New   Hampshire    16  29  2,442 

Massachusetts    40  97  8,013 

Rhode  Island   8  31  1,425 

Connecticut     7  43  1,542 

New  York   5  14  955 

New   Jersey    1  3  83 

Pennsylvania    14  8  1,469 

Maryland    9  11  1,344 

Virginia     6  21  1,269 

North  Carolina   3  9  607 

South   Carolina    4  8  789 

Georgia    0  2  50 


COLONIAL  INDUSTRY,  1660-1763  99 

The  colonists  made  many  of  the  vessels  which  the  Eng- 
lish used  to  maintain  their  leadership  among  commercial 
nations.  Just  before  the  Revolution  England's  merchant 
marine  consisted  of  7,694  vessels,  of  which  2,342  were  of 
American  construction.  It  was  not  an  uncommon  occur- 
rence for  a  colonial  merchant  to  send  a  shipload  of  goods  to 
England  and  sell  both  ship  and  cargo. 

Manufactures.  To  a  very  large  extent  the  colonists 
depended   upon    the    mother    country    for    manufactured 


Spinning-Wheel 

goods.  The  articles  made  in  the  colonies  were  not  so  good 
as  those  produced  in  England,  and  because  of  the  high 
wages  of  skilled  labor  colonial  manufacturing  was  expen- 
sive. Many  a!ttempts  to  establish  industries  failed  be- 
cause of  the  excessive  cost  of  labor. 

Grist  mills  for  making  meal  and  flour  were  common  in 
all  the  colonies.  The  spinning  wheels  and  looms  of  colon- 
ial housewives  made  a  large  part  of  the  textile  goods  which 
the  people  used,  but  this  homespun  cloth  was  of  coarse 
grade,   rough   woolens   and   linens,   and  linsey-woolsey,   a 


100  COLONIAL  INDUSTRY,  1660-1763 

cloth  with  a  woof  of  woolen  and  a  warp  of  flaxen  threads. 
In  New  England  and  in  the  iMiddle  colonies  some  house- 
holds had  a  surplus  of  cloth  or  knit  goods  which  was  sold 
with  other  products  of  the  farm.  These  colonies  had  a 
number  of  shoemakers  and  hatters  who  carried  on  a  thriv- 
ing business.  Hempen  ropes  and  sail  cloth  of  domestic 
manufacture  were  used  on  colonial  ships;  brick  and  tile 
yards  supplied  material  for  colonial  houses;  leather  har- 
ness and  saddles,  rude  furniture  and  farm  carts  and  wagons 
were  also  in  the  list  of  colonial  manufactured  products. 
At  nearly  all  the  colonial  iron  furnaces  various  wares 


Hand  Loom 

were  made  for  domestic  use.  Kettles,  andirons,  and  other 
household  articles,  plowshares,  anchors  and  chains  were 
made  in  the  northern  colonies.  These  colonies  had  a  num- 
ber of  slitting  mills  and  rolling  mills,  many  of  which  con- 
tinued to  operate  even  after  the  restrictive  law  of  1750  was 
enacted.  In  the  Schuylkill  valley,  at  Sterling  INIountain, 
New  York,  in  Morris  County,  New  Jersey,  and  in  various 
towns  of  Rhode  Island  and  Connecticut  were  the  chief 
iron  manufacturing  industries.  A  common  household  in- 
dustry of  New  England  was  the  making  of  nails  from  the 


COLONIAL  INDUSTRY,  1660-1T63  101 

wire  drawn  in  Connecticut  and  Rhode  Island  mills.  In  ad- 
dition to  the  iron  made  into  finished  articles  by  the  colonists, 
a  large  quantity  of  pig  and  bar  iron  was  exported  to 
England,  the  amount  reaching  7,525  tons  in  1771. 

One  of  the  most  important  colonial  manufacturing  in- 
dustries was  the  distillation  of  rum.  The  colonists  found 
that  they  could  make  a  greater  profit  by  importing 
molasses  and  making  their  own  rum  than  by  importing 
rum  from  the  West  Indies.  The  vessels  which  took  fish, 
pickled  beef  and  pork,  and  forest  products  to  the  West 
Indies  returned  with  hogsheads  of  molasses.  In  all  the 
New  England  colonies  a  number  of  distilleries  were  erected, 
the  chief  center  of  the  industry  being  Newport,  Rhode 
Island.  Thousands  of  gallons  of  New  England  rum  were 
consumed  in  the  colonies  and  exported  abroad.  The  most 
important  outside  market  was  Africa,  where  Newport  mer- 
chants exchanged  rum  for  negro  slaves. 

Colonial  Commerce.  One  indication  of  the  growing 
wealth  of  the  colonies  was  the  steady  expansion  of  their 
commerce.  Unfortunately  colonial  officials  were  careless 
both  in  making  and  in  preserving  records,  and  we  do  not 
have  complete  statements  of  colonial  trade  such  as  we  now 
have  of  the  trade  of  nearly  all  countries.  However  the 
customs  authorities  of  England,  after  1697,  kept  a  fairly 
accurate  acount  of  the  commerce  between  the  mother  coun- 
try and  the  colonies.  The  record  of  this  trade,  as  sum- 
marized in  the  following  table,  may  be  taken  as  evidence 
of  the  growth  of  colonial  trade  as  a  whole  :-^ 

Annual  Avekage  of  the  Commerce  Between  England  and  thb 
Thirteen  Colonies. 

Annual  Average                        Colonial  Exports  Colonial  Import? 

to  England  from  England 

£           s.    fl.  £           s.    d. 

From  1700  to  1710                     265,783     0   10  267,205     3     4 

From  1710  to  1720                      392,653   17     1  365,645     7  11 

Fl-om  1720  to  1730                     518,830   16     6  471,342  12   10 

From  1730  to  1740                     670,128   16     0  660,136  11      1 


102  COLONIAL  INDUSTRY,  1660-1763 

Annual  Aj'ebage  of  the  Commerce  Between  England  and  the 
Thirteen  Colonies. 

From  1740  to  1750  708,943     9     6  812,647  13     0 

From  1750  to  1760  802,691     6  10  1,577,419   16     2 

/rom  1760  to  1770  1,044,591  17     0  1,763,409  10     3 

In  addition  to  their  commerce  with  England  the  colonies 
carried  on  an  extensive  trade  with  the  West  Indies, 
Southern  Europe  and  Africa.  Of  the  value  of  this  traf- 
fic before  1760  little  exact  information  is  to  be  had.  For 
a  period  of  five  years  however,  from  1768  to  1772,  statis- 
tics of  the  entire  colonial  trade  were  collected  by  colonial 
officials.  The  following  table  shows  the  value  of  the  im- 
ports and  exports  of  the  various  colonies  for  the  year 
1770: 

Imports  From 

Colony                                Great  Southern  West 

Britain  Europe  Indies               Africa 

£         8.  d.        £         s.    d.  £         s.  d.         £           e. 

New   Hampshire    ...']  f      652     7     6  48,528  18  7T 

Massachusetts     I  ooq  cq;;  n  r  J  21,908     3     6  155,387     1  4l           ,„„ 

Rhode    Island    r  ^^a.oyo  ii  o  <    ^  ^g^  ^^     g  56.839  17  3  f         ^°" 

Connecticut     J  L       267     5     3  53,993   17  3j 

New     York     75,930  19  7     14,922     7     8  97,420     4  0            697   10 

New    Jersey    326  18     2  1,663  19  9 

Pennsylvania      204,979  17  4     .14,249     8     4  180,591   12  4 

Maryland     iri^a^QK;  eS     4. 683     2     3  32,197   13  9          5,400     0 

Virginia     ^Cl4,a4,jlD  »j     g  ^^g     g     4  77,453   12  6          7,020     0 

North    Carolina    so?  nsA     b  k          932  19     9  10,603   13  3          1,080     0 

South    Carolina    J  i^/,"»4     »  b|     g-^gg     g     ^  65,666     4  8     124,18«  IP 

Georgia     58,340  10  5           547     7     7  9,407     9  9       13,440     0 

Total     1,604,975  11   11     76,684     9  11     789,754     4     5     151,998     0 

Exports  To 

Colony                          Great                 Southern  West 

Britain                  Europe  Indies  Africa 

£           8.    d.          £         s.    d.  £         s.  d.  £        s.    d. 

New   Hampshire      "1                                 f       464     0     5  40,431     8  4  96  11     3 

Massachusetts     •■•t  1.9  77^19     q J  76,702     0     4  123,394     0  6  9.801     9  10 

Connecticut     ^142,77&  1^     y<     1,44011     0  65,206  13  2  7,814  19     8 

Rhode    Island     ...J                                 I    2,567     4     5  79,395     7  6       

New    York    113,382     8     8       50,885  13     0  6,632   17  5  1,313     2     6 

New    Jersey     2.531   16  5 

Pennsylvania      ...       28,112     6     9     203,752   11    11  178,331     7  8  560     9     9 

Maryland     I  rr>o  qai      r,     ^  i   66,5.55  11   11  22.303     0  2 

Virginia     ^  ?JJ,9bl     5     0  j   ^3  ggg     3     ^  68.946     9  1 

North    Carolina    .-I  .nrimi   i-?     i    ''    •'^•238     3     7  27,944     7  9  71   15     4 

South    Carolina    .  j  *05,014   13     1    (_  72,881     9     3  59.814   11  6  619   16     9 

Georgia     82,270     2     3            614     2     0  13,285  15  1       

Total     1,531,516     8     6     552,736  11     2     747,910     3     7     20.278     5     1 


COLONIAL  INDUSTRY,  1660-1763  103 

This  table  shows  that  all  the  colonies  received  the 
greater  part  of  their  imports  from  the  mother  country. 
These  imports  consisted  chiefly  of  manufactured  goods,  of 
which  wearing  apparel  was  the  most  important  single  item. 
All  the  colonies  bought  largely  of  the  West  Indies,  the  im- 
ports of  the  northern  colonies  from  this  source  being  much 
greater  than  that  of  the  southern  colonies  because  of  the 
large  quantities  of  molasses  taken  for  the  rum  distilleries. 
South  Carolina  and  Georgia  imported  some  of  their  slaves 
directly  from  Africa,  but  most  of  the  negroes  brought  to 
the  continental  colonies  were  purchased  in  the  West  Indies. 
The  northern  colonies  bought  much  of  the  salt  used  in  their 
fisheries  from  Spain  and  Portugal;  all  the  colonies  used 
winQ  from  the  Madeira  and  Azores  Islands. 

The  export  trade  of  the  northern  and  southern  colonies 
showed  the  results  of  England's  commercial  policy.  Since 
tobacco,  rice  and  indigo,  the  leading  commercial  products  of 
the  South,  were  enumerated,  the  exports  of  this  section 
were  confined  almost  entirely  to  the  mother  country.  Eng- 
land would  take  but  little  of  the  fish,  grain  and  flour  of  the 
northern  colonists,  who  had  their  chief  markets  in  South- 
ern Europe  and  the  West  Indies.  Trade  among  the  thir- 
teen colonies  was  relatively  unimportant,  since  no  colony 
produced  anything  which  could  be  sold  in  large  quantities 
in  any  other  colony.  The  southern  colonies  produced  their 
own  food  and  bought  nearly  all  their  imported  necessities 
from  England.  The  northern  colonies  consumed  some  of 
the  tobacco  and  rice  of  the  South,  but  not  enough  to  create 
an  important  intercolonial  trade.  Perhaps  the  most  im- 
portant article  of  intercolonial  traffic  was  rum,  which  the 
New  England  traders  sold  in  all  the  colonies. 

Tobacco  led  all  other  colonial  exports  in  value.  For  the 
greater  part  of  the  colonial  period  fish  had  second  place, 
but  by  1770  the  exports  of  wheat,  flour  and  bread  greatly 
exceeded  in  value  the  exports  of  fish,  which  were  third  in 


104  COLONIAL  INDUSTRY,  1660-1763 

rank,  with  rice  a  close  fourth.  Forest  products,  including 
naval  stores,  indigo,  whale  oil  and  bone,  deerskins  and 
furs,  pig  and  bar  iron,  pot  and  pearl  ashes,  pickled  beef 
and  pork,  and  horses  were  the  next  most  important  exports. 

The  frequent  wars  in  which  England  became  involved 
during  the  century  following  1660  were  detrimental  to 
colonial  trade.  In  those  days,  as  now,  the  ships  and  prop- 
erty of  the  enemy  country  captured  on  the  seas  could  be 
confiscated  as  prizes  of  war.  Not  only  did  ordinary  naval 
vessels  prey  upon  commerce,  but  warring  countries  would 
grant  ''letters  of  marque  and  reprisal"  to  private  ship- 
owners authorizing  them  to  capture  the  merchant  ships 
of  enemy  nations.  Privateering  of  this  kind  had  only  the 
excuse  of  war  to  distinguish  it  from  piracy.  When  Eng- 
land went  to  war  the  merchant  ships  of  the  colonies  were 
subject  to  the  risk  of  capture.  This  naturally  tended  to 
hamper  colonial  trade.  Moreover  colonial  commerce  suf- 
fered because  colonial  seamen  forsook  merchant  vessels  for 
the  ships  of  the  royal  navy,  and  because  many  colonial 
shipowners  temporarily  abandoned  their  ordinary  busi- 
ness to  take  the  chance  of  making  large  profits  by  arming 
their  vessels  and  sending  them  out  as  privateers. 

During  the  seventeenth  century  and  the  early  part  of 
the  eighteenth,  colonial  trade,  as  well  as  the  trade  of  all 
European  countries,  suffered  great  loss  on  account  of  pi- 
racy. Many  unscrupulous  adventurers  engaged  in  this  ne- 
farious business,  pillaging  peaceful  merchant  ships  and 
often  murdering  their  crews.  The  West  Indies  were  a  fa- 
vorite resort  of  pirates,  and  many  legends  and  stirring  tales 
still  survive  of  the  exploits  of  the  sea-thieves  who  infested 
the  waters  of  these  islands.  They  captured  many  colonial 
trading  ships  and  occasionally  they  attacked  and  robbed 
the  settlements  along  the  coasts  of  the  southern  colonies. 

Some  of  the  pirates  made  a  practice  of  bringing  their 
illgotten   merchandise  to   America  to   dispose   of   it.     In 


COLONIAL  INDUSTRY,  1660-1763  105 

some  of  the  colonies,  notably  New  York  and  Pennsylvania, 
avaricious  governors  enriched  themselves  by  giving  protec- 
tion to  pirate  traders.  Toward  the  close  of  the  seven- 
teenth century  the  English  government  took  energetic 
measures  to  suppress  piracy,  and  a  few  years  of  vigorous 
activity  left  the  seas  much  safer  for  peaceful  traders.  One 
of  the  pirates  caught  and  hanged  was  the  famous  Cap- 
tain Kidd,  whose  "buried  treasure"  has  furnished  the 
theme  of  many  tales. 

With  war  and  piracy  and  the  perils  of  the  sea  to  con- 
tend with  the  life  of  colonial  traders  was  never  monoto- 
nous. But  the  merchants  of  New  England  and  the  Middle 
Colonies  were  men  who  seemed  to  thrive  on  adversity. 
Though  the  dangers  were  great  the  profits  of  successful 
voyages  were  likewise  great,  and  there  were  many  who 
willingly  took  the  risk.  Successful  merchants,  such  as 
Peter  Faneuil  and  Thomas  Amory  of  Boston,  and  the  elder 
Derbys  of  Salem,  became  very  wealthy.  In  those  days  it 
was  customary  for  the  merchant  to  own  both  merchandise 
and  ship.  He  loaded  his  vessel  with  home  products  gath- 
ered from  country  stores  or  directly  from  producers,  and 
sent  it  away  in  charge  of  a  trusted  captain  who  sailed 
from  port  to  port,  bartering,  selling  and  buying,  always 
endeavoring  to  make  a  profit  on  each  exchange.  A  vessel 
might  be  gone  for  two  years  or  more  before  finally  reaching 
the  home  port  with  a  cargo.  One  of  the  favorite  branches 
of  the  New  England  commerce  was  the  triangular  trade  to 
Africa  and  the  West  Indies.  Loaded  with  rum  a  vessel 
proceeded  to  the  African  coast  where  the  liquor  was  ex- 
changed for  slaves.  The  slaves  were  taken  to  the  West 
Indies  and  the  proceeds  of  their  sale  invested  partly  in 
molasses  which  was  brought  home  to  make  more  rum. 
The  voyage  from  Africa  to  the  West  Indies,  because  it  was 
the  second  part  of  this  three-cornered  voyage,  was  known  as 
the  "Middle  Passage."     During  this  part  of  the  journey  the 


106  COLONIAL  INDUSTRY,  1660-1763 

slaves  were  on  board  the  ship.  At  a  later  date,  after  the 
slave  trade  became  illegal,  the  ]\Iiddle  Passage  was  noted 
for  the  horrors  arising  from  the  crowding  and  the  brutal 
treatment  of  the  negroes,  but  during  the  colonial  period 
the  human  cargoes  seem  to  have  been  well  treated. 

Colonial  Money  and  Exchangee.  The  American  colo- 
nists suffered  some  inconvenience  in  their  commercial  af- 
fairs because  of  a  lack  of  sufficient  currency.  They  could 
never  keep  very  long  any  metallic  money  which  they  ob- 
tained. In  any  new  country  the  imports  are  usually  larger 
than  the  exports.  The  people  need  all  kinds  of  tools  and 
equipment,  and  their  purchases  of  such  goods  always  keep 
ahead  of  their  production  for  export.  Though  constantly 
growing  richer  they  are  incurring  debts  for  goods  which 
will  enable  them  to  do  better.  These  debts  carry  away 
the  metallic  money,  which  is  the  only  kind  of  money  ac- 
cepted in  international  trade,  and  unless  a  satisfactory 
substitute  is  provided  there  is  a  chronic  shortage  of  cur- 
rency. 

The  colonists  tried  to  meet  this  lack  of  metal  currency 
in  many  ways.  In  New  England,  during  the  early  days, 
they  used  Indian  wampum  as  a  medium  of  exchange. 
Later  they  used  beaver  skins,  corn,  wheat  and  other  grains. 
They  also  established  a  mint,  at  which  they  converted  their 
silverware  into  coins,  but  these  coins  met  the  fate  of 
others  which  reached  the  colonies — they  were  soon  ex- 
ported to  pay  foreign  debts.  The  Virginians  used  tobacco 
for  purposes  of  exchange;  the  inhabitants  of  South  Caro- 
lina and  Georgia  used  rice.  In  1727  the  Virginia  govern- 
ment authorized  the  use  of  tobacco  notes.  Planters  put 
their  tobacco  into  public  warehouses,  taking  in  exchange 
receipts  or  certificates  of  deposit  made  payable  to  the 
bearer.  These  certificates  could  be  passed  from  hand  to 
hand  the  same  as  money. 

The  system  of  making  exchanges  by  the  use  of  com- 


COLONIAL  INDUSTRY,  1660-1763  107 

modities  was  known  as  "country  pay."  For  greater  con- 
venience commodities  used  in  exchange  were  given  values 
in  English  currency — pounds,  shillings  and  pence.  Ac- 
counts were  kept  by  the  same  standard,  but  the  colonists 
saw  little  English  money.  The  coins  which  came  to  the 
colonies  were  chiefly  Spanish  and  Portuguese  coins  obtained 
in  the  West  Indies  and  Southern  Europe,  pieces  of  eight, 
milled  dollars  and  smaller  coins  of  silver,  and  "joes"  and 
pistoles  of  gold.  Even  these  coins  were  always  valued  in 
terms  of  English  currency.  Some  colonies  tried  to  attract 
coined  money  from  other  colonies  by  giving  the  coins  a 
higher  currency  value.  This  practice  added  to  the  con- 
fusion of  the  colonial  monetary  system. 

Another  method  of  meeting  the  lack  of  metallic  money 
was  by  the  use  of  bills  of  exchange.  A  New  England 
fisherman  would  sell  a  cargo  of  fish  to  a  sugar  planter  in 
the  West  Indies.  In  return  he  would  receive  an  order 
for  a  sum  equal  to  the  price  of  the  fish,  drawn  upon  a 
London  merchant  to  whom  the  planter  had  shipped  his 
crop  of  sugar.  The  fisherman  might  give  the  bill  of  ex- 
change to  a  New  England  merchant  in  payment  for  sail 
cloth  and  fishing  tackle,  and  the  New  England  merchant 
would  send  it,  as  part  payment  for  imported  goods,  to  a 
creditor  in  London,  who  in  turn  would  present  it  to  the 
merchant  upon  whom  it  was  drawn.  A  single  bill  could 
thus  be  employed  in  several  transactions.  The  chief  dif- 
ficulty in  using  bills  of  exchange  was  that  all  the  transac- 
tions after  the  first  one  usually  involved  sums  of  money  of 
a  different  amount  from  that  named  in  the  bill.  For  this 
reason  bills  of  exchange  could  be  used  best  by  those  who 
had  frequent  and  regular  dealings  with  one  another. 
Purchases  of  goods  were  charged  to  the  buyer  and  he  was 
credited  with  the  bills  of  exchange  as  they  were  presented. 
A  very  large  part  of  the  colonial  overseas  trade  was  car- 
ried on  through  the  use  of  book  credit  and  bills  of  ex- 


108  COLONIAL  INDUSTRY,  1660-1763 

change.  The  books  of  a  London  merchant  sometimes 
showed  a  balance  against,  and  sometimes  a  balance  in 
favor  of  his  colonial  customer.  Usually  however  the  bal- 
ance was  against  the  colonial  merchants,  because  however 
much  they  might  export  they  always  had  a  market  for  im- 
ports larger  than  they  could  supply  except  by  straining 
their  credit  to  the  fullest  possible  extent. 

While  bills  of  exchange  worked  well  in  foreign  trade  and 
could  be  used  to  some  extent  in  domestic  trade  they  did 
not  offer  an  adequate  means  of  carrying  on  the  many  small 
commercial  transactions  which  are  a  part  of  the  daily  life 
of  a  community.  "Country  pay"  was  unsatisfactory,  be- 
cause the  commodities  were  perishable  and  inconvenient 
to  handle,  and  because  their  value  changed  so  frequently. 
Though  the  commodities  used  as  money  were  declared  to 
have  a  certain  value  in  English  currency  nobody  would 
accept  them  at  such  a  value  if  their  actual  value  in  silver 
was  less,  and  nobody  would  let  them  go  at  such  a  value 
if  their  price  in  silver  was  greater.  The  fluctuations  in 
the  value  of  commodity  currency  frequently  caused  debtors 
and  creditors  to  suffer  heavy  losses.  In  1758  when  a  short 
crop  caused  a  substantial  increase  in  the  price  of  tobacco 
the  Virginia  legislature  passed  a  law  authorizing  the  peo- 
ple of  the  colony  to  settle  their  debts  in  money  at  the  rate 
of  twopence  a  pound  for  the  tobacco  which  they  would  have 
paid.  Since  tobacco  was  worth  much  more  than  twopence 
a  pound  this  law  made  creditors  lose  money.  The  king  dis- 
allowed the  act,  and  one  of  the  Virginia  clergymen  brought 
suit  for  the  money  due  him  on  the  basis  of  the  actual  price 
of  the  tobacco  which  he  should  have  received  as  his  year's 
salary.  It  was  in  the  trial  of  this  "Parson's  Case"  that 
young  Patrick  Henry  achieved  fame  as  an  orator.  Henry 
vigorously  defended  the  Twopenny  Act  and  said  that  "a 
king  by  disallowing  acts  of  this  salutary  nature,  from  being 


COLONIAL  INDUSTRY,  1660-1763  109 

a  father  of  his  people,  degenerated  into  a  tyrant  and  for- 
feited all  his  right  to  his  subjects'  obedience." 

In  all  the  colonies  efforts  were  made  to  use  paper  money 
as  a  medium  of  exchange.  The  first  colonial  paper  money 
was  issued  by  ^Massachusetts  in  1690-91  to  pay  the  soldiers 
who  had  taken  part  in  the  invasion  of  Canada.  The  Gen- 
eral Court  issued  £40,000  in  ''bills  of  credit"  of  small 
denomination.  They  were  made  receivable  for  taxes;  two 
years  later  they  were  made  legal  tender  in  all  payments  and 
also  made  redeemable  in  silver  after  twelve  months.  Other 
colonies  soon  followed  the  example  of  Massachusetts,  and 
in  a  short  time  all  of  them  were  experimenting  with  paper 
currency.  The  bills  were  issued  first  to  pay  the  debts  of 
the  colonial  governments;  then  they  were  issued  to  pay 
current  expenses;  and  in  some  colonies  they  were  issued 
as  loans  to  private  individuals  who  could  offer  suitable 
security.  In  nearly  all  cases  the  bills  were  made  legal 
tender. 

Had  the  colonial  authorities  acted  with  caution  these 
experiments  might  have  been  beneficial.  But  instead  of 
adopting  a  wise  policy  of  taxation  to  provide  for  current 
expenses  and  for  the  redemption  of  the  bills  of  credit, 
they  reissued  the  old  bills  as  soon  as  they  were  paid  in 
for  taxes,  and  as  expenses  grew  they  authorized  the  issue 
of  still  more.  Since  the  bills  were  irredeemable  and  the 
quantity  constantly  increased  the  people  soon  lost  con- 
fidence in  them.  They  depreciated  rapidly,  being  accepted 
in  ordinary  exchanges  for  only  a  small  fraction  of  their 
nominal  value  and  in  many  cases  becoming  totally  worth- 
less. It  was  always  the  debtor  class  who  profited  by  the 
depreciation  of  the  paper  currency.  Obtaining  the  bills  of 
credit  at  actual  value  they  could  compel  creditors  to  ac- 
cept them  at  face  value  for  the  satisfaction  of  debt. 
Honest  business  men  were  defrauded  and  they  vigorously 


110  COLONIAL  INDUSTRY,  1660-1763 

opposed  the  issue  of  more  paper  mouey,  but  unfortunately 
for  them  the  colonial  legislatures  were  usually  made  up  of 
representatives  of  the  debtor  class.  Not  only  did  these 
debtors  make  fraudulent  use  of  paper  money  as  individuals, 
but  they  caused  the  colonial  governments  to  repudiate  their 
debts  by  enacting  laws  recognizing  the  depreciation  of  the 
currency  which  had  been  out  for  some  time  and  refusing 
to  accept  it  for  taxes  at  face  value. 

Dishonorable  practices  of  this  kind  destroyed  all  con- 
fidence in  the  bills  of  credit.  Rhode  Island,  New  Hamp- 
shire, Connecticut  and  the  Carolinas  were  the  worst  of- 
fenders in  the  issue  of  worthless  paper  money.  In  Penn- 
sylvania the  government  exercised  moderation  and  care, 
and  the  bills  of  that  colony  were  usually  equal  in  value 
to  silver.  In  1751  Parliament  forbade  the  issue  of  paper 
money  by  the  New  England  colonies  except  in  cases  of 
great  emergency  or  in  time  of  war,  and  thirteen  years 
later  a  more  stringent  law  was  passed,  applicable  to  all 
the  colonies,  which  forbade  making  bills  of  credit  legal 
tender.  This  legislation  caused  much  irritation  and  con- 
tributed not  a  little  to  the  ill  feeling  which  eventually 
led  to  the  war  for  independence. 

In  addition  to  the  bills  of  credit  issued  by  the  legisla- 
tures the  colonies  had  a  small  amount  of  paper  currency 
issued  by  associations  of  individuals.  The  usual  origin 
of  these  notes  was  for  the  members  of  the  associations  to 
deposit  mortgages  of  their  lands  with  trustees,  'who  would 
issue  the  notes,  holding  the  mortgages  as  security  for  their 
redemption.  The  mortgagors  agreed  to  accept  the  notes  in 
all  payments.  These  land-banks  were  looked  upon  with 
disfavor  by  the  colonial  governments  and  by  Parliament, 
and  all  of  them  had  brief  careers,  usually  ending  in  dis- 
aster for  the  promoters  who  were  compelled  to  redeem  the 
notes  issued.  No  more  land-banks  were  organized  after 
1740.     Even  had  they  not  been  suppressed  by  law  they 


COLONIAL  INDUSTRY,  1660-1763  111 

would  inevitably  have  failed  to  perform  their  purpose 
of  supplying  a  satisfactory  currency.  The  great  essential 
of  a  paper  currency — of  any  promise  to  pay  that  is  meant 
to  circulate  as  money — is  that  there  be  entire  certainty 
among  the  people  that  it  can  be  redeemed  in  actual  money 
on  demand.  Since  it  would  have  been  impossible  for  the 
organizers  of  the  land-banks  to  redeem  their  obligations 
on  demand  there  is  no  doubt  that  the  notes  would  have  de- 
preciated even  if  the  law  had  not  intervened  to  put  a  stop 
to  their  issue.  Paper  money  is  a  dangerous  expedient, 
and  it  can  be  used  successfully  only  when  proper  safe- 
guards are  provided.  Unhappily  the  experiments  of 
colonial  days  did  not  impress  the  lesson  upon  the  Ameri- 
can people.  It  took  many  years  of  bitter  experience  to 
teach  them  the  truth. 

Colonial  Transportation  and  Communication.  The  first 
settlers  in  America  lived  near  the  ocean,  and  those  who 
led  the  way  to  the  interior  made  their  homes  along  the 
rivers  of  the  Atlantic  slope.  The  ocean  and  the  rivers  af- 
forded ample  means  of  transportation  and  the  colonists 
found  it  unnecessary  to  give  much  time  to  the  construc- 
tion of  roads.  All  the  rivers  of  the  Atlantic  coast  were 
important  highways  throughout  the  colonial  period,  not 
only  the  large  streams  such  as  the  Hudson  and  Delaware, 
but  the  Merrimac,  Connecticut,  Susquehanna,  Potomac, 
James,  Savannah,  and  many  smaller  streams  now  consid- 
ered unnavigable.  For  short-distance  travel  people  used 
canoes  and  row  boats,  and  they  moved  their  goods  in  flat- 
boats,  scows  and  barges  propelled  by  poles  or  long  sweeps. 
Long  distances  were  traversed  in  sailing  vessels. 

When  the  population  spread  back  from  the  edges  of  the 
natural  highways  it  became  necessary  to  provide  means 
for  land  transportation.  In  1639  the  General  Court  of 
Massachusetts  directed  each  town  in  the  colony  to  build 
roads  connecting  with  roads  of  adjacent  towns.     In  the 


112 


COLONIAL  INDUSTRY,  1660-1763 


other  colonies  similar  measures  were  taken  for  the  con- 
struction of  local  highways.  These  early  roads  usually 
followed  the  forest  trails  of  the  Indians.  They  were  all 
unspeakably  poor,  sloughs  of  mire  in  the  spring  and  thick 
with  dust  in  the  summer  and  fall.  Early  travelers  went 
from  place  to  place  on  horseback,  and  packhorses  were  em- 


Colonial  Stage  Coach 

ployed  to  transport  freight.  The  roads  in  the  more  popu- 
lous districts  were  gradually  improved  until  it  became 
possible  to  use  wagons  and  coaches  upon  them. 

As  the  number  of  people  increased  the  network  of  high- 
ways became  more  extensive.  A  number  of  long  roads 
were  built.     In  1654  land  travel  between  Boston  and  Provi- 


COLONIAL  INDUSTRY,  1660-1763  113 

dence  became  possible  over  the  Common  Road;  the  Shore 
Road  later  gave  connection  with  New  York.  From  the 
Jersey  shore  opposite  that  city  the  King's  Path  led  to  the 
Delaware  River  near  Philadelphia.  Before  the  end  of  the 
colonial  period  a  highway  was  established  from  Savannah 
to  Baltimore  and  Philadelphia.  When  Braddock  led  his 
ill-fated  expedition  from  Alexandria,  Virginia,  against  Fort 
Duquesne  in  1755  his  men  cut  a  road  through  the  wilder- 
ness and  hauled  their  equipment  in  wagons.  General  John 
Forbes  opened  a  road  from  Philadelphia  entirely  across 
Pennsylvania  when  he  led  his  troops  across  the  colony 
to  occupy  Fort  Duquesne  in  1758.  Both  these  roads  to 
the  west  later  became  important  routes  of  travel  for  emi- 
grants to  the  Ohio  Valley. 

With  the  poor  roads  that  existed  the  amount  of  colonial 
travel  and  trade  was  necessarily  small.  Traveling  was  not 
only  highly  uncomfortable  but  often  dangerous.  Vehicles 
overturned  in  the  deep  ruts  and  mud-holes.  Only  the 
smaller  streams  were  bridged,  the  others  being  forded  or 
crossed  by  ferry.  For  the  most  part  travelers  rode  their 
own  horses  or  used  their  own  vehicles.  Regular  service 
by  stage-coach  did  not  become  common  until  after  the 
Revolution.  One  of  the  early  regular  stage  lines  was  that 
established  between  New  York  and  Philadelphia  about 
1750.  The  trip  between  the  two  cities  took  three  days. 
The  stage  left  Paulus  Hook  (now  Jersey  City)  and  went 
by  way  of  New  Brunswick  to  Trenton,  the  passengers  com- 
pleting the  journey  from  that  city  by  boat. 

The  regular  traffic  of  most  importance  on  the  colonial 
highways  was  that  of  the  post-riders.  All  the  colonies  had 
local  postal  service  early  in  their  history  and  in  1672 
New  York  established  a  monthly  postal  service  to  Boston. 
Madam  Sarah  Kemble  Knight,  who  wrote  an  interesting 
account  of  her  trip  from  Boston  to  New  Haven  in  1704, 
told  of  her  dependence  upon  the  post-riders  for  guidance 


114 


COLONIAL  INDUSTRY,  1660-1763 


over  the  route  which  she  traveled.  Early  in  the  eighteenth 
century  the  English  government  established  a  postal  service 
for  all  colonies.  In  1720  mail  was  carried  regularly  once 
a  week  between  New  York  and  Philadelphia,  the  trip  in 
each    direction    taking    three    days.     In    1754    Benjamin 


THE  FLYING  MACHINE,  kept  by 
John  MerLvieau,  at  the  Hew  BVizmit-Star- Ferry, 
near  Nr**- York.  TetsofF  from  Powles  Hook  <>very   Mon. 
day,  Wcdncfday,  and  Friday  Mornings,  for  Fhi/adelphia, 
and  performs  ih»  Journey  in  a  Day  and  a  Half,  for  the 
fumnwrSeafon,  till  theifto(  hovemberi  from  that  Time 
(o  go  twice  a  Week    (ill   the  firft   of  Ma*,  when  they 
again  perform  i(  three  T>mc«  a  Week.     When  the  Stages 
jto  only  twice  a  Week,  they  fet  o'f  Mondays  and  Thurf- 
days.     The  Waggon*  in  fhiiadelphia   fet   ovt.  from  the 
Sign  of  (he  George,  in  Second- Afcct,  the  (amt  Morning. 
The  Paffengers  are  defired  (ocrofs  (he  frrry  (be  Evening 
before,  as  the  Stage*  mu(l  (et  off  early  (he  next  Morning 
The  frict^  for e»ih  y^nengtr'f  Tfrtftf  SMlitgj,  Proc.  Mwi 
tiooia  a*  ufual.    Faflen^rs  going  Par*  of  the  Wjy  to  pay 
in  Proporlion. 

.As  the  Proprictc*'  hn  madefoch  Iniprovemenft  wprit 
t&eMachinc),  on«of  which  is  in  Imitation  of  a  Coach. 

1<k«  liopo  to  merit  th«  Favoar  of  th*  Pubf  ick. 
JOHN  MERCEREAI7. 


Stage  Coach  Advertisement,  1771 
Reprinted  from   McKinley'a  Illuntrated   Topics  for   American   History,   by   per- 
mission of  Prof.  A.  E.  McEinley. 

Franklin,  who  the  preceding  year  had  been  named  Post- 
master of  Philadelphia,  was  made  Deputy  Postmaster  Gen- 
eral in  charge  of  all  the  colonial  postal  service.  Frank- 
lin was  a  good  business  man.  He  systematized  the  service, 
extended  it,  and  managed  it  so  economically  and  efficiently 


COLONIAL  IxNDUSTRY,  1660-1763  115 

that  it  not  only  became  at  once  self-supporting  but  pro- 
duced a  revenue  for  the  government.  He  reduced  the 
time  of  service  between  Philadelphia  and  New  York  to 
thirty-six  hours,  and  despatched  mails  from  each  city  three 
times  a  week  in  summer  and  twice  a  week  in  winter.  In 
1755  he  started  a  weekly  service  between  Philadelphia  and 
Boston,  announcing  that  a  letter  could  be  sent  from  one 
city  to  the  other  and  the  answer  returned  in  three  weeks. 
This  was  a  long. time,  as  we  view  the  matter,  but  it  was 
just  one-half  the  time  of  the  service  before  Franklin's 
management  began. 

By  the  end  of  the  colonial  period  the  inhabitants  of 
America  were  becoming  keenly  aware  of  their  lack  of 
adequate  means  of  inland  transportation.  The  number  of 
people  living  at  a  distance  from  navigable  waterways  was 
steadily  growing  and  the  heavy  costs  of  transportation 
were  becoming  a  serious  handicap  to  economic  develop- 
ment. People  began  to  study  seriously  the  problem  of 
constructing  more  and  better  roads,  and  in  some  of  the 
colonies  canal  routes  were  surveyed.  However  the  work 
of  improvement  had  to  wait  until  after  the  Revolutionary 
War  had  been  fought  and  a  stable  government  established. 

Relations  of  the  Colonies  with  the  Mother  Country. 
The  relations  between  the  colonies  and  the  mother  country 
during  the  century  following  1660,  while  not  always  har- 
monious, were  nevertheless  of  such  a  friendly  nature  that 
few  people  dreamed  of  the  possibility  of  armed  rebellion 
against  English  rule.  Though  because  of  the  coming  of 
so  many  "foreigners"  the  Americans  of  1763  were  not 
wholly  Anglo-Saxon,  yet  their  language  and  customs  were 
predominantly  English,  and  they  felt  a  pride  in  being  a 
part  of  the  powerful  British  empire.  They  were  loyal 
subjects  of  the  English  crown  and  were  perfectly  willing 
to  remain  such. 

But  while  the  colonists  looked  upon  themselves  as  loyal 


116  COLONIAL  INDUSTRY,  1660-1763 

English  subjects  they  did  not  have  any  feeling  of  sub- 
serviency to  or  of  dependence  upon  the  English  govern- 
ment. In  many  respects  they  had  become  different  from 
the  people  of  England.  They  had  different  methods  of 
government,  different  systems  of  labor  and  land  tenure, 
and  different  industries.  Their  political,  religious  and 
economic  organization  was  different  from  the  political,  re- 
ligious and  economic  organization  prevailing  in  England; 
they  had  many  interests  which  were  peculiarly  their  own, 
in  which  the  people  of  England  had  no  part.  The  colonial 
policy  of  England  had  long  been  of  a  nature  to  permit 
the  colonists  to  develop  a  spirit  of  independence.  They 
had  a  large  measure  of  freedom  in  the  management  of  their 
internal  affairs,  and  this  freedom  they  looked  upon  as  a 
right  not  to  be  interfered  with  by  the  English  govern- 
ment. They  recognized  the  right  of  Parliament  to  enact 
laws  regulating  their  external  relations.  While  they  did 
not  always  approve  of  the  commercial  regulations  of  Par- 
liament, and  frequently  disobeyed  or  evaded  them,  they 
did  not  question  the  right  of  Parliament  to  make  and  en- 
force such  regulations.  On  the  other  hand  they  bitterly 
opposed  all  Parliamentary  legislation  which  tended  in  the 
least  to  take  from  them  the  management  of  their  domestic 
affairs.  And  in  nearly  all  the  colonies  the  frequent  and 
prolonged  contests  between  the  representatives  of  the 
people  and  the  royal  governors  served  to  show  that  they 
were  willing  to  defend  what  they  considered  to  be  their 
rights  and  privileges  as  a  free  people. 

Moreover  the  Americans  did  not  place  the  interests  of 
the  empire  as  a  whole  above  their  own  personal  interests. 
They  did  not  permit  loyalty  to  the  empire  to  cause  them 
any  undue  inconvenience.  During  the  French  and  Indian 
War  they  joined  whole-heartedly  in  the  attempt  to  expel 
the  French  from  Canada  and  the  Ohio  Valley,  but  at  the 
same  time  they  did  not  hesitate  to   carry  on   an   active 


COLONIAL  INDUSTRY,  1660-1763  117 

trade  with  the  French  possessions  in  the  West  Indies. 
The  efforts  of  the  English  navy  to  conquer  the  French 
islands  in  the  Caribbean  Sea  were  seriously  impeded  by 
this  treasonable  commerce.  English  armies  in  America 
were  forced  to  obtain  provisions  from  England  at  the  very 
time  the  New  England  colonists  were  selling  dozens  of  ship- 
loads of  food  to  the  French  authorities  in  the  West  Indies. 
In  the  final  year  of  the  war  Lord  Amherst,  the  English 
commander  in  America,  had  to  place  an  embargo  on  all 
trade  of  New  England  and  the  Middle  Colonies. 

However,  the  views  which  the  colonists  held  of  their 
peculiar  rights  and  privileges  would  not  have  caused  a 
break  with  the  mother  country  had  there  not  been  a  sudden 
radical  change  in  the  English  colonial  policy.  By  1763 
the  colonies  had  come  to  be  virtually  self-governing 
dominions,  and  had  they  been  permitted  to  remain  such 
they  might  have  long  been  a  part  of  the  British  empire. 
But  the  English  government  adopted  a  new  policy  toward 
the  colonies ;  this  policy  the  colonists  resented ;  their  pro- 
tests soon  became  riots,  and  the  riots  developed  into  armed 
resistance  to  English  authority. 

The  responsibility  for  the  new  colonial  policy  of  Eng- 
land and  the  resulting  loss  of  the  American  colonies  rests 
almost  wholly  on  George  III,  who  became  king  of  Eng- 
land in  1760.  In  the  seventeenth  century  England  had 
witnessed  a  bitter  struggle  between  the  king  and  the  people, 
in  which  the  people  had  taken  from  the  crown  its  auto- 
cratic power  and  made  Parliament  the  real  governing 
authority  in  England.  In  the  contest  for  self-government 
they  had  put  one  king  to  death  and  driven  another  from 
the  country.  Notwithstanding  these  object  lessons  George 
III  was  determined  to  be  the  real  ruler  of  his  empire;  he 
wanted  to  be  king  in  fact  as  well  as  in  name.  Supported 
by  a  powerful  group  known  as  the  "king's  friends"  he 
broke  down  the  factions  opposed  to  him  and  secured  a 


118  COLONIAL  INDUSTRY,  1660-1763 

Parliament  the  majority  of  which  was  willing  to  carry  out 
his  directions.  The  resistance  of  the  colonists  to  the  king's 
policy  was  only  a  phase  of  the  final  struggle  between 
autocracy  and  democracy  in  the  English  political  system. 
The  leading  Englishmen  that  opposed  the  king  indorsed 
the  stand  of  the  colonists  because  they  knew  that  the  cause 
of  the  colonists  was  their  own. 

When  the  war  with  France  ended  in  1763,  the  colonists, 
rejoicing  in  the  final  defeat  of  their  unfriendly  neighbors, 
were  looking  hopefully  to  the  future.  The  long  war  had 
caused  heavy  losses  in  men  and  money,  it  had  disorganized 
commerce  and  production ;  with  the  return  of  normal 
conditions  the  people  expected  a  revival  of  business  and 
renewed  prosperity.  Instead  they  were  just  entering  upon 
a  momentous  struggle  which  was  to  change  the  entire  course 
of  American  political  and  economic  history. 

Questions  and  Topics 

1.  Compare  the  nationality,  characteristics,  and  destina- 
tions of  the  immigrants  of  to-day  with  those  of  the  period 
from  1660  to  1763. 

2.  Do  you  know  of  any  communities  of  foreigners  who 
have  not  become  fully  Americanized? 

3.  Compare  the  sources  of  our  increase  in  population 
from  1660  to  1763  with  those  shown  by  our  latest  census. 

4.  Can  you  point  out  any  locality  where  natural  re- 
sources are  being  wasted  at  present?     How? 

5.  Make  a  list  of  the  natural  resources  of  your  own 
State. 

6.  What  does  your  own  community  produce  in  excess  of 
its  own  needs? 

7.  Why  do  people  to-day  feel  confidence  in  paper  cur- 
rency ? 

8.  Compare  the  time  required  for  present  day  trans- 
portation from  Philadelphia  to  New  York  by  water,  by 
rail,  by  automobile,  by  airplane  with  the  time  required  for 
the  trip  in  1720  by  post-riders. 


COLONIAL  INDUSTRY,  1660-1763  119 

Show  one  difference  between  England  and  one  of  her 
colonies  in  1763  in  each  of  the  following: 

1.  Method  of  gov-  3,  Land   tenure       5.  Industries 
emment. 

2.  System  of  labor    4.  Economic  or-      6.  Religion 

ganization 


CHAPTER  VII 
THE  NEW  COLONIAL  POLICY  AND  ITS  RESULTS 

The  Beginning  of  the  New  Policy.  Almost  the  first  step 
of  George  III  after  he  became  king  was  to  get  rid  of  Wil- 
liam Pitt,  the  leader  of  the  English  ministry,  who  had 
been  chiefly  responsible  for  the  energetic  prosecution  of 
the  war  against  France  by  which  England  had  so  widely 
extended  her  imperial  domain.  Pitt  was  succeeded  by 
Lord  Bute,  one  of  the  staunchest  of  the  "king's  friends." 
Associated  with  Lord  Bute  in  the  ministry  were  George 
Grenville  and  Charles  Townshend,  who  were  destined  to 
be  prominent  figures  in  the  approaching  struggle  with 
the  colonies.  With  the  aid  and  counsel  of  these  men 
King  George  laid  his  plans  to  restore  the  supremacy  of  the 
crown. 

Peace  was  made  with  France  and  Spain.  The  end  of 
the  war  found  England  with  a  debt  of  some  £130,000,000, 
which  at  that  time  was  thought  to  be  enormous.  The  ex- 
penses for  the  protection  of  the  great  empire  and  the 
interest  charges  upon  the  national  debt  made  necessary  a 
large  increase  in  revenue.  Before  this  time  a  large  part 
of  the  revenues  of  the  English  government  had  been  ob- 
tained by  the  taxation  of  land.  The  English  landholders 
were  averse  to  any  further  increase  in  their  taxes,  and 
it  was  thought  desirable  for  the  ministry  to  seek  new 
sources  of  revenue.  One  of  the  most  promising  sources 
appeared  to  be  the  American  colonies.  The  foremost 
feature  of  the  new  colonial  policy  was  taxation. 

Not  only  were  the  colonies  to  be  taxed  but  they  were  to 
be  governed  with  a  firmness  which  had  before  been  lack- 

120 


THE  NEW  COLONIAL  POLICY  121 

ing  in  English  colonial  administration.  The  ministry  an- 
nounced that  all  the  navigation  laws  and  acts  of  trade  were 
to  be  enforced  to  the  letter,  including  even  the  obnoxious 
Molasses  Act  of  1733.  A  standing  army  of  at  least  ten 
thousand  men  was  to  be  stationed  in  the  colonies  and  the 
colonists  were  to  pay  for  its  maintenance.  The  old  export 
duties  levied  b>  the  act  of  1673  and  the  duties  imposed 
by  the  Molasses  Act  were  to  be  supplemented  by  other 
duties  on  commerce,  and  the  stamp  taxes,  long  common  in 
Great  Britain,  were  to  be  extended  to  America. 

When  the  colonists  heard  that  the  British  government 
was  intent  upon  a  strict  enforcement  of  the  navigation 
laws,  and  particularly  of  the  Molasses  Act,  they  were  filled 
with  dismay.  Their  expectations  of  peaceful  prosperity 
were  replaced  with  forebodings  of  commercial  ruin.  Pro- 
tests and  petitions  were  sent  to  England  in  an  endeavor 
to  convince  the  authorities  that  the  enforcement  of  the 
Molasses  Act  would  not  only  bring  disaster  to  the  colonies 
but  would  injure  the  trade  of  England.  A  remonstrance 
from  Rhode  Island  stated  that  the  colony  imported  four- 
teen thousand  hogsheads  of  molasses  each  year,  of  which 
not  more  than  twenty-five  hundred  came  from  the  British 
West  Indies.  Moreover  the  English  islands  did  not  pro- 
duce enough  molasses  for  export  to  meet  the  needs  of 
the  Rhode  Island  distillers  alone.  If  the  New  Englanders 
should  be  prevented  from  conducting  their  customary  trade 
with  the  foreign  West  Indies  their  economic  prosperity 
would  be  destroyed. 

In  spite  of  the  remonstrances  of  the  colonists  the  Eng- 
lish ministry  proceeded  with  its  designs.  Lord  Bute, 
somewhat  dismayed  by  the  agitation  about  the  new  colonial 
policy  and  by  the  clamor  about  certain  other  activities 
which  the  ministry  had  undertaken  in  behalf  of  the  king, 
resigned  from  office,  and  was  succeeded  by  Grenville,  under 
whose  leadership  the  new  policy  was  put  into  effect.     Gren- 


122  THE  NEW  COLONIAL  POLICY 

ville's  first  act  was  to  issue  orders  to  all  colonial  govern- 
ors and  customs  officials  that  they  should  require  a  strict 
observance  of  the  laws  relating  to  colonial  trade.  His 
next  step  was  to  start  his  legislative  program. 

The  Sugar  Act  of  1764.  The  first  law  on  Grenville's 
program  was  the  Sugar  Act  of  1764.  This  law  was  the 
Molasses  Act  of  former  years  reenacted  in  a  modified 
form.  The  preamble  of  the  act  left  no  doubt  as  to  the 
purpose  of  the  authors.  It  stated,  ''  Whereas  it  is  ex- 
pedient that  new  Provisions  and  Regulations  should  be 
established  for  improving  the  Revenue  of  this  Kingdom, 
and  for  extending  and  securing  the  Navigation  and  Com- 
merce between  Great  Britain  and  Your  Majesty's  Domin- 
ions in  America,  which  by  the  Peace,  have  been  so  hap- 
pily enlarged  and  whereas  it  is  just  and  expedient  that 
a  Revenue  be  raised  in  Your  Majesty's  said  Dominions  in 
America  for  defraying  the  Expenses  of  defending,  pro- 
tecting, and  securing  the  same  ..." 

A  duty  of  threepence  a  gallon  was  placed  upon  foreign 
molasses  imported  into  the  colonies  instead  of  the  prohibi- 
tive duty  of  ninepence  provided  in  the  act  of  1733,  and 
a  duty  of  one  pound  two  shillings  a  hundredweight  was 
laid  upon  foreign  sugar.  The  importation  of  foreign  rum 
by  the  colonies  was  forbidden.  Very  heavy  duties  were 
laid  upon  all  wines  which  were  not  imported  from  Great 
Britain,  this  being  a  direct  reversal  of  the  policy  embodied 
in  the  act  of  1663  which  gave  the  colonies  permission  freely 
to  import  wines  from  the  Madeira  and  Azores  Islands. 
The  British  wine  merchants  had  long  desired  the  trade  of 
the  colonists.  Relatively  light  duties  were  placed  upon 
several  other  articles,  among  which  were  foreign  indigo, 
coffee,  wines  and  East  India  textile  goods.  Export  duties 
similar  to  those  of  1673  were  laid  upon  coffee  and  pimen- 
toes  exported  from  one  colony  to  another,  and  the  list  of 
enumerated  commodities  was  increased  by  the  addition  of 


THE  NEW  COLONIAL  POLICY  123 

coffee,   pimentoes,   cocoanuts,   whale  fins,   raw  silk,   hides 
and  skins,  and  pot  and  pearl  ashes. 

It  was  estimated  that  the  duties  collected  in  the  colonies 
would  amount  to  about  £20,000  a  year.  A  substantial  re- 
duction was  made  in  the  amount  of  the  drawbacks  previ- 
ously allowed  upon  European  goods  shipped  from  England 
to  America,  and  this  reduction,  it  was  thought,  would  in- 
crease the  royal  revenues  by  £25,000  annually.  Since  the 
total  revenue  which  the  Sugar  Act  was  expected  to  pro- 
duce, £45,000  a  year,  fell  far  short  of  the  £300,000  which 
it  cost  England  to  support  its  military  and  civil  establish- 
ment in  the  colonies,  Grenville  made  preparations  to  exact 
additional  revenue  from  the  colonists  by  means  of  stamp 
taxes. 

The  Stamp  Act.  In  March,  1765,  George  III  gave  his 
assent  to  the  Stamp  Act.  This  law  required  the  colonists 
to  place  stamps  upon  all  legal  papers,  such  as  deeds,  bonds, 
contracts  and  licenses,  upon  newspapers  and  pamphlets, 
college  diplomas,  ship's  papers  and  many  other  documents. 
So  long  was  the  list  of  documents  to  be  stamped  and  so 
numerous  the  rates  named  that  the  printed  act  filled  sixty- 
two  pages. 

The  colonists  had  protested  vigorously  against  the  Sugar 
Act  of  1764.  Its  enforcement  soon  injured  the  trade  of 
the  merchants  of  New  England  and  the  Middle  Colonies. 
The  depression  of  commerce  caused  hard  times  for  every- 
body, and  people  showed  their  displeasure  with  the  new 
colonial  policy  in  a  number  of  ways.  Merchants  in  Boston 
agreed  not  to  buy  certain  English  goods;  artisans  agreed 
to  use  work  clothes  made  only  of  domestic  leather;  efforts 
were  made  in  many  places  to  encourage  the  development 
of  manufactures.  However  it  was  very  difficult  to  make 
any  organized  resistance  to  the  operation  of  the  law. 
Smuggling  was  attempted  more  frequently,  but  with  the 
increased  watchfulness  of  the  customs  officials  smuggling 


124 


THE  NEW  COLONIAL  POLICY 


became  a  more  difficult  undertaking.  The  colonists 
grumbled,  but  it  seemed  that  the  Sugar  Act  would  eventu- 
ally be  accepted.  The  English  ministry  believed  that  the 
Stamp  Act  too  would  excite  nothing  more  than  verbal 
protests.  Even  the  leading  men  of  the  colonies  did  not 
believe  the  enforcement  of  the  Stamp  Act  would  be  actively 
resisted,  and  some  of  them  actually  asked  for  positions 
as  stamp  distributors. 

However,  the  English  ministry  and  the  colonial  leaders 
had  deceived  themselves.  A  number  of  colonial  legisla- 
tures sent  dignified  petitions  to  the  king,  some  of  them 


PENNSYLVANIA  JOURNAL; 
WEEKLY   ADVERTISER. 


EXPIRING.     In   Hoj«  of  •   R^wtiAon  t,  Li.i  i«wn 


Announcement  of  the  Suspension  of  the  Pennsylvania 
Journal  because  of  the  Stamp  Act 

Reprinted  from   McEinley'a  Illustrated   Topics  for   American   History,  by   per- 
mission of  Prof.  A.  E.  McKinley. 

even  going  so  far  as  to  say  that  no  taxes  could  be  rightly 
collected  from  the  colonists  unless  levied  by  the  colonists 
themselves.  The  legislature  of  INIassachusetts  passed  a 
resolution  inviting  all  the  colonies  to  send  delegates  to 
New  York  to  draw  up  a  joint  remonstrance  to  be  presented 
to  the  king. 

The  people  were  not  content,  however,  with  mere  peti- 
tions and  resolutions.  They  saw  their  trade  dwindling 
away  under  the  restrictive  laws ;  they  saw  the  English  gov- 
ernment taking  away  the  metallic  money  of  the  colonies 
and  at  the  same  time  forbidding  the  use  of  paper  money ; 


THE  NEW  COLONIAL  POLICY  125 

they  felt  that  these  new  taxes  were  only  the  beginning 
of  a  policy  designed  to  impoverish  them  and  destroy  their 
freedom.  It  was  much  easier  to  offer  resistance  to  the 
Stamp  Act  than  to  the  Sugar  Act,  because  the  former 
affected  directly  a  much  greater  number  of  people.  The 
opposition  took  the  form  of  mob  violence. 

In  Boston,  where  the  resentment  against  taxation  was 
greatest,  because  of  the  strength  of  the  commercial  in- 
terests, a  mob  destroyed  the  office  where  the  stamps  were 
put  on  sale,  stormed  the  home  of  the  stamp  collector, 
making  him  promise  to  resign,  and  even  sacked  the  home 
of  the  acting  governor  of  the  colony.  In  several  other 
colonies  violent  demonstrations  took 
place.  It  was  impossible  to  collect 
the  stamp  taxes.  Inasmuch  as  legal 
papers  without  stamps  were  invalid 
there  was  much  question  as  to  how 
the  courts  and  other  public  agencies 
should  conduct  their  business. 

In   October,    1765,    a   congress   as- 
sembled at  New  York  in  response  to      i'  '  '  '  '■^gli 

the  invitations  which  the  Massachu- 

.  ,    ,  -      T  ,       rrn  IJritish  Stamp 

setts  legislature   had  sent  out.     the 

gathering  was  made  up  of  representatives  from  nine  colo- 
nies and  included  some  of  the  most  able  men  in  America. 
These  men  drew  up  petitions  to  the  king  and  a  ''Declaration 
of  Rights  and  Grievances  of  the  Colonists  in  America." 
They  asserted  that  "taxation  without  representation"  was 
unjust,  and  they  also  complained  of  the  Sugar  Act  which 
was  destroying  the  commerce  of  the  northern  colonies. 
Though  the  declaration  contained  no  threat  of  rebellion  it 
indicated  clearly  that  the  colonies  were  ready  to  make  a 
united  stand  against  the  English  government. 

Meanwhile  the  indignant  colonists  had  begun  to  use  a 
weapon  which  was  more  effective  than  mob  violence.     This 


126  THE  NEW  COLONIAL  POLICY 

weapon  was  non-importation.  In  Boston,  New  York,  Phil- 
adelphia and  many  other  places  the  merchants  signed 
agreements  binding  themselves  to  buy  no  goods  whatever 
from  Great  Britain  until  the  Stamp  Act  should  be  repealed. 
Many  associations  called  "Sons  of  Liberty"  were  formed, 
the  members  agreeing  to  buy  no  articles  imported  from 
Great  Britain.  In  a  very  short  time  the  exports  of  Eng- 
lish manufacturers  and  merchants  began  to  show  an 
alarming  decline,  and  Parliament  was  urged  to  give  heed 
to  the  protests  of  the  colonists. 

The  Victory  of  the  Colonists.  King  George  was  highly 
displeased  with  the  results  of  Grenville's  legislation.  He 
approved  of  the  purpose  of  the  laws,  but  he  thought  the 
purpose  should  be  accomplished  without  so  much  commo- 
tion. He  was  also  displeased  because  Grenville  tried  to 
"lecture"  him  on  his  royal  duties.  If  any  "lecturing" 
was  to  be  done  George  thought  that  the  king  should  be 
lecturer  and  the  minister  listener.  Grenville  was  dismissed 
from  office  and  a  new  ministry  formed.  Because  Parlia- 
ment was  not  yet  under  control  the  king  was  forced  to 
name  the  Marquis  of  Kockingham  in  Grenville's  place. 
Rockingham  did  not  approve  of  the  king's  colonial  policy, 
and  the  leading  members  of  the  ministry  were  likewise  op- 
posed to  the  course  which  Grenville  had  pursued. 

In  March  1766  Parliament  repealed  the  Stamp  Act. 
At  the  same  time  however  it  passed  the  Declaratory  Act 
in  which  it  was  asserted  that  Parliament  had  the  legal 
right  to  enact  laws  binding  the  colonies  in  all  ways  what- 
soever. A  little  later  the  Sugar  Act  was  modified.  For 
the  duty  of  threepence  a  gallon  on  foreign  molasses  there 
was  substituted  a  purely  revenue  duty  of  one  penny  a 
gallon  on  all  molasses  imported  into  the  colonies.  The 
high  duties  on  foreign  sugar  remained  unchanged,  but  the 
export  duties  on  British  sugar,  levied  by  the  act  of  1673, 
as  well  as  the  export  duties  on  coffee  and  pimentoes 
shipped    from    one    colony    to    another,    were    repealed. 


THE  NEW  COLONIAL  POLICY  127 

New  import  duties  were  laid  upon  coffee  and  pimen- 
toes  originating  in  British  colonies.  The  import  duties 
on  textiles  provided  in  the  act  of  1764  were  replaced 
with  export  duties  to  be  collected  in  England.  The  com- 
merce of  the  colonies  was  restricted  by  a  clause  forbidding 
them  to  export  anything  whatever  to  European  ports  north 
of  Cape  Finisterre.  Previously  the  colonists  had  been 
permitted  to  take  non-enumerated  goods  wherever  they 
chose. 

The  colonists  heard  with  great  enthusiasm  of  the  repeal 
of  the  Stamp  Act.  New  York  City  voted  statues  to 
George  III  and  William  Pitt,  the  latter  having  warmly  de- 
fended the  colonists  before  Parliament.  A  figure  of  King 
George,  on  horseback,  was  cast  in  lead  and  erected  in 
Battery  Place.  A  few  years  later  it  was  pulled  down  and 
melted  into  bullets  to  be  used  against  the  king's  soldiers. 

Though  the  colonists  did  not  like  the  tone  of  the  Declar- 
atory Act  they  were  content  to  remain  silent  as  long  as 
Parliament  did  not  endeavor  to  exercise  the  rights  claimed 
in  the  act ;  and  though  they  preferred  that  the  commercial 
regulations  and  taxes  of  the  act  of  1764  should  have  been 
repealed  altogether,  they  were  willing  to  accept  the  re- 
strictions and  the  exactions  of  the  act  of  1766.  The  quar- 
rel with  the  mother  country,  it  was  thought,  had  come  to 
a  peaceful  end. 

The  Townshend  Acts.  The  Rockingham  ministry  did 
not  last  long.  It  had  neither  the  favor  of  the  king  nor 
the  support  of  the  more  powerful  of  the  king's  opponents. 
Rockingham  resigned  late  in  1766,  and  a  new  ministry 
came  into  power  headed  by  Wiliam  Pitt,  now  the  earl  of 
Chatham.  Pitt  was  friendly  to  the  colonies,  but  unfor- 
tunately he  was  compelled  by  sickness  to  withdraw  for  a 
time  from  all  public  activities.  During  his  absence  Charles 
Townshend,  the  Chancellor  of  the  Exchequer  and  one  of 
the  leading  men  of  the  ministry,  reopened  the  struggle  with 
the  colonies.     Townshend  believed  the  colonies  should  be 


128  THE  NEW  COLONIAL  POLICY 

taxed,  and  partly  because  of  his  belief  and  partly  because 
he  wanted  to  do  something  which  others  had  apparently 
been  unable  to  do,  he  brought  a  new  program  of  colonial 
taxation  and  commercial  regulation  before  Parliament. 

Townshend's  program  was  carried  out  in  four  laws. 
Two  of  them  provided  new  official  machinery  and  methods 
for  the  enforcement  of  the  colonial  revenue  laws,  another 
suspended  the  legislature  of  New  York  for  its  refusal  to 
make  provision  for  the  British  troops  quartered  in  the 
colony,  the  fourth  levied  duties  on  all  tea,  glass,  printers' 
colors,  and  paper  imported  into  the  colonies. 

The  Second  Non-Importation  Movement.  Again  the 
colonists  witnessed  with  alarm  the  efforts  of  Parliament 
to  tax  them  and  interfere  with  their  liberties,  and  again 
they  offered  resistance.  The  victory  in  the  struggle  over 
the  Stamp  Act  had  been  comparatively  easy,  and  little 
difficulty  was  expected  in  bringing  Parliament  to  terms 
once  more.  The  chief  method  chosen  by  the  colonists  to 
display  their  rebellious  spirit  was  the  renewal  of  the  non- 
importation associations.  This  time  the  agreements  to 
buy  no  British  goods  were  much  greater  in  number  than 
at  the  time  the  Stamp  Act  was  being  resisted.  All  the 
leading  commercial  cities  of  the  northern  colonies  had  non- 
importation associations,  and  the  people  of  the  southern 
colonies  likewise  showed  their  disapproval  of  the  Town- 
shend  acts  by  curtailing  their  purchases  from  the  mother 
country.  Some  of  the  non-importation  agreements  ap- 
plied only  to  taxed  goods;  most  of  them  however  applied 
to  all  goods  of  British  origin. 

Defiance  of  law  again  bred  disorder.  In  1768  a  Boston 
mob  roughly  handled  some  customs  officials  who  had  seized 
John  Hancock's  sloop  Liberty,  upon  which  some  ^Madeira 
wines  had  been  imported  without  payment  of  taxes. 
Troubles  of  this  kind  caused  the  British  government  to 
send   over   additional   soldiers,   which   the    colonists   were 


THE  NEW  COLONIAL  POLICY  129 

required  to  support.  The  presence  of  the  soldiers  was 
a  constant  source  of  irritation.  In  1770  a  part  of  a  Brit- 
ish regiment  stationed  in  Boston  fired  upon  a  mob  which 
attacked  them,  killing  and  wounding  a  number  of  persons. 
This  "Boston  Massacre"  served  to  inflame  the  minds  of 
the  Americans  still  more. 

Meanwhile  the  British  ministry  had  changed  again. 
Townshend  had  died  even  before  the  laws  which  bear  his 
name  had  all  gone  into  effect.  Pitt  did  not  recover  his 
health  and  his  ministry  was  dissolved  in  December  1769. 
By  this  time  George  III  had  obtained  control  of  Parlia- 
ment and  for  his  prime  minister  he  was  able  to  name  a 
man  who  he  knew  would  follow  his  wishes.  This  man  was 
Lord  North,  who  took  office  early  in  1770.  Lord  North 
believed  in  colonial  taxation,  but  he  did  not  approve  of 
all  the  Townshend  taxes  because  they  were  levied  in  part 
on  British  manufactures.  One  object  of  having  colonies 
was  to  provide  a  market  for  British  goods.  In  1770  Par- 
liament passed  a  law  removing  the  duties  on  British 
colors,  glass  and  paper,  but  retaining  the  taxes  on  those 
articles  which  were  of  foreign  production  and  also  retain- 
ing the  tax  on  tea. 

Colonial  Resistance  Wanes.  The  colonists  did  not 
abandon  their  non-importation  associations  at  once  after 
the  enactment  of  the  law  of  1770.  Some  were  determined 
by  this  time  to  keep  up  resistance  until  all  the  obnoxious 
Parliamentary  taxes  were  repealed  and  the  policy  which 
prevailed  before  1764  restored.  Action  of  this  kind  how- 
ever meant  heavy  losses  to  traders  and  a  number  whose 
desires  for  profits  got  the  better  of  their  patriotic  inclina- 
tions began  to  weaken.  In  New  York  and  in  some  of  the 
Southern  colonies  the  non-importation  agreements  were 
rescinded.  When  one  city  or  district  resumed  active 
trade  other  sections  could  not  be  expected  to  hold  out, 
and  trade  with  the  mother  country  was  soon  restored  in  all 


130  THE  NEW  COLONIAL  POLICY 

the  colonies.  The  people  were  nevertheless  watchful  for 
fresh  activities  by  Parliament.  At  the  suggestion  of 
Samuel  Adams  "committees  of  correspondence"  were  or- 
g'anized  throughout  the  colonies  for  the  purpose  of  main- 
taining frequent  communication  concerning  relations  be- 
tween the  colonies  and  the  mother  country.  The  radical 
element  was  guilty  too  of  occasional  acts  of  violence,  an 
example  of  which  was  the  destruction  of  the  Gaspee  in 
1772.  The  Gaspee  was  a  small  British  naval  vessel  which 
had  been  employed  effectively  in  the  suppression  of  smug- 
gling. It  ran  aground  on  Namquit  Point,  Khode  Island, 
while  endeavoring  to  capture  a  colonial  trading  vessel,  and 
during  the  night  it  was  attacked  and  burned  by  some 
citizens  of  Providence. 

In  spite  of  such  outbreaks  it  seemed  for  a  time  that 
the  trouble  between  the  king  and  his  colonial  subjects  was 
coming  to  an  end.  Colonial  commerce  and  industry  re- 
sumed its  former  prosperous  state.  The  people  paid  the 
import  duties  which  had  not  been  repealed,  even  the  tax  on 
tea,  though  not  a  few  merchants  engaged  in  smuggling 
to  a  greater  extent  than  in  former  years.  If  matters  had 
been  allowed  to  rest  as  they  were  it  is  possible  that  in  the 
course  of  a  few  years  harmony  would  have  been  restored. 
But  the  British  government  could  not  let  well  enough 
alone.     In  1773  it  made  another  mistake. 

The  Boston  Tea  Party,  Parliament's  mistake  was  its 
endeavor  to  give  financial  aid  to  the  British  East  India 
Company,  which  for  some  time  had  been  near  to  bank- 
ruptcy. The  method  adopted  by  Parliament  was  to  remit 
the  English  duties  on  the  Company's  tea  and  allow  con- 
signments of  it  to  be  sent  to  the  colonies  for  sale.  The 
remission  of  the  duties  usually  collected  in  England  would 
enable  the  Company  to  sell  its  tea  at  a  very  low  price  and 
still  obtain  a  good  profit. 

Tea  was  a  favorite  article  in  the  colonial  smuggler's 


THE  NEW  COLONIAL  POLICY  131 

business,  because  under  ordinary  conditions  it  could  be 
bought  more  cheaply  in  the  Netherlands  than  in  England. 
Moreover,  with  the  exception  of  wine,  tea  was  the  only  im- 
portant product  imported  from  Europe  which  the  col- 
onists had  much  desire  to  buy  elsewhere  than  in  England. 
When  it  was  heard  in  America  that  the  East  India  Com- 
pany had  been  authorized  to  send  cargoes  of  tea  to  the 
colonial  cities,  the  merchants,  knowing  that  the  tea  would 
be  placed  on  sale  at  a  low  price,  immediately  began  to  com- 
plain that  Parliament  was  organizing  a  conspiracy  to  ruin 
them  because  of  their  opposition  to  taxation.  The  mer- 
chants were  especially  angry  because  the  East  India  Com- 
pany had  selected  as  its  agents  for  the  sale  of  the  tea  many 
colonial  traders  who  had  refused  to  join  the  non-impor- 
tation associations. 

Late  in  1773  the  East  India  tea  ships  arrived  at  Boston, 
New  York,  Philadelphia  and  other  colonial  ports.  The 
people  declared  that  the  tea  should  not  be  landed.  The 
vessels  which  reached  New  York  and  Philadelphia  re- 
turned to  England  with  their  cargoes.  At  Boston  the 
customs  authorities  refused  to  let  the  ships  sail  until 
the  tea  was  landed  and  the  duties  paid.  If  the  tea 
was  not  voluntarily  landed  within  a  certain  time  the  cus- 
toms oflficers  had  the  right  to  seize  it  and  hold  it  for  the 
payment  of  taxes.  The  owners  of  the  tea  hesitated.  On 
December  16,  the  day  before  it  was  necessary  for  the 
customs  officials  to  act,  a  body  of  men  clothed  in  Indian 
garb  boarded  the  ships  and  emptied  the  tea  into  the  harbor. 

Parliament  Tries  Coercion.  The  British  government 
now  made  a  mistake  which  was  fatal  to  the  cause  of  recon- 
ciliation. King  George  was  furious  when  he  heard  of  the 
"Boston  Tea  Party,"  and  he  decided  that  instead  of  en- 
deavoring to  appease  his  enraged  subjects  by  amendment  of 
the  unpopular  laws  he  would  punish  them  for  their  past 
misconduct  and  compel  their  obedience  in  the  future.     Five 


132  THE  NEW  COLONIAL  POLICY 

new  laws  were  hastily  passed  by  Parliament.  One  closed 
the  port  of  Boston  to  all  external  commerce,  except  coast- 
wise traffic  in  food  and  fuel  necessary  for  the  city,  until 
the  people  made  submission  to  the  king  and  paid  for  the 
destroyed- tea.  Another  act  changed  the  form  of  govern- 
ment of  JNIassachusetts ;  a  third  permitted  colonial  agents  of 
the  king,  who  were  accused  of  violence  in  executing  the 
law,  to  be  taken  to  England  for  trial ;  a  fourth  provided  for 
the  quartering  of  soldiers  upon  the  people  of  Massa- 
chusetts; and  the  fifth  annexed  to  Quebec  the  territory 
between  the  Ohio  and  Mississippi  Rivers  and  the  Great 
Lakes.  The  last  act  was  passed  to  extinguish  the  claims  of 
the  colonies  to  the  lands  west  of  New  York  and  Pennsyl- 
vania. Additional  soldiers  were  sent  to  Boston.  General 
Gage  was  named  governor  of  INIassachusetts  and  directed 
to  enforce  the  law.  Instead  of  cooperating  with  the  new 
governor,  the  people  of  Massachusetts  set  up  a  separate 
government  of  their  own  and  openly  defied  the  authority 
of  crown  and  Parliament. 

The  First  Colonial  Congress.  The  other  colonies  were 
not  slow  in  showing  their  sympathy  with  Massachusetts  and 
in  taking  steps  to  express  their  feeling  toward  the  British 
government.  On  September  5,  1774,  a  congress  of  dele- 
gates from  all  the  colonies  except  Georgia  met  at  Philadel- 
phia. This  congress,  like  the  one  of  1765,  contained  some 
of  the  most  influential  Americans  of  the  time,  among  whom 
were  John  Adams,  Samuel  Adams,  John  Jay,  Richard 
Henry  Lee,  Patrick  Henry,  and  George  "Washington.  The 
delegates  drew  up  a  "Declaration  of  Rights"  in  which  they 
recited  their  many  grievances,  denied  the  right  of  Par- 
liament to  legislate  for  them  on  matters  of  taxation  and 
management  of  their  internal  affairs,  protested  against  the 
maintenance  of  a  standing  army  in  the  colonies,  and  named 
a  long  list  of  acts  of  Parliament  which  violated  the  legal 
rights  of  the  colonies. 


THE  NEW  COLONIAL  POLICY  133 

What  was  more  important  than  the  declaration  of  rights 
was  the  enactment  of  the  famous  *' continental  associa- 
tion." Stating  that  "To  obtain  redress  of  grievances  .  .  . 
we  are  of  the  opinion  that  a  non-importation,  .non- 
consumption,  and  non-exportation  agreement,  faithfully- 
adhered  to,  will  prove  the  most  speedy,  effectual  and  peace- 
able measures, ' '  the  delegates  agreed  that  unless  the  ' '  cruel 
and  oppressive"   acts  of   Parliament   were   repealed  the 


Samuel  Adams 

colonists  would,  after  December  1,  1774,  import  nothing 
whatever  from  Great  Britain,  no  molasses,  syrups,  coffee 
or  pimentoes  from  the  British  West  Indies,  and  no  East 
India  tea  from  any  part  of  the  world ;  that  they  would 
not  purchase  or  consume  any  East  India  tea  or  any  other 
article  which  they  agreed  not  to  import ;  and  that  they 
would  not,  after  September  10,  1775,  export  anything 
whatever  to  Great  Britain  or  the  West  Indies.  One  article 
of  the  association  bound  the  colonists  not  to  import  any 


134  THE  NEW  COLONIAL  POLICY 

slave  after  December  1,  1775,  after  which  time  they  were 
wholly  to  discontinue  the  slave  trade  even  to  the  extent 
of  refusing  to  hire  vessels  or  sell  goods  to  those  engaged 
in  it.  Before  adjournment  the  congress  agreed  to  assem- 
ble a  second  time  the  following  May  if  in  the  meantime 
the  grievances  of  the  colonies  had  not  been  redressed. 

The  association  was  ratified  almost  immediately  by  all 
the  colonies  except  Georgia.  Committees  were  appointed  to 
see  that  the  agreement  was  kept.  .  Provincial  congresses 
assembling  in  the  various  colonies  enacted  resolutions  con- 
cerning the  enforcement  of  the  association  and  some  even 
established  penalties  for  disobedience.  Such  resolutions 
and  penalties  had  small  show  of  legality  however  and  the 
enforcement  of  the  association  was  obtained  chiefly  by  vio- 
lent action  on  the  part  of  the  radical  element.  A  few  mer- 
chants who  would  not  observe  the  rules  were  tarred  and 
feathered ;  others  were  driven  from  the  colonies.  In  a 
short  time  the  association  was  made  completely  effective 
and  imports  from  Great  Britain  were  almost  entir;ely 
excluded. 

The  association  had  a  pronounced  effect  in  Great  Brit- 
ain and  the  West  Indies,  English  merchants  and  manu- 
facturers began  at  once  to  suffer  large  losses  of  trade,  and 
they  appealed  to  Parliament  to  grant  the  demands  of  the 
colonists.  The  people  of  the  West  Indies,  being  depen- 
dent upon  the  continental  colonies  for  a  large  part  of  their 
food,  were  thoroughly  frightened  by  the  threat  of  non-ex- 
portation, and  they  too  appealed  to  Parliament  to  give  in 
to  the  American  demands.  William  Pitt  defended  the  col- 
onists, and  the  great  orator,  Edmund  Burke,  made  a  pow- 
erful plea  for  conciliation.  But  Lord  North  and  King 
George  were  done  with  peaceful  methods.  In  response  to 
the  refusal  of  the  colonists  to  trade  with  Great  Britain 
and  the  West  Indies  a  law  was  enacted  early  in  1775  for- 
bidding New  England  to  trade  with  any  part  of  the  world 


THE  NEW  COLONIAL  POLICY  135 

except  the  British  Isles  and  the  British  West  Indies.  This 
act  of  restraint  was  subsequently  extended  to  most  of  the 
other  colonies.  Lord  North  thought  that  since  the  colonists 
had  refused  to  trade  with  Great  Britain  it  was  but  just  that 
they  should  be  deprived  of  the  right  to  trade  with  other 
nations.  The  New  Englanders  were  also  forbidden  to 
fish  along  any  part  of  the  coast  of  North  America.  The 
king  had  decided  to  starve  his  rebellious  subjects  into  sub- 
mission. 

The  Final  Break.  Even  before  the  king's  final  measure 
of  coercion  became  known  in  America  the  colonists  had 
come  to  the  conclusion  that  they  must  either  submit  or 
fight.  They  did  not  hesitate  in  their  choice.  A  second 
provincial  congress  elected  by  the  people  of  Massachusetts 
began  to  organize  a  military  force,  eftlisting  men  and  gath- 
ering ammunition  and  other  military  stores.  On  April  18, 
1775,  General  Gage  sent  a  force  of  men  from  Boston  to 
destroy  the  stores  at  Lexington  and  Concord.  The  war 
had  come. 

On  May  10  the  Continental  Congress  met  again  at  Phil- 
adelphia. It  assumed  at  once  the  direction  of  the  contest 
with  the  mother  country,  authorizing  the  raising  of  a 
"continental  army"  and  naming  Washington  as  com- 
mander-in-chief of  all  forces  "raised  or  to  be  raised  for 
the  defense  of  American  liberty." 

For  a  time  the  members  of  Congress  hoped  for  recon- 
ciliation instead  of  separation.  They  urged  the  enforce- 
ment of  the  non-importation  and  non-consumption  features 
of  the  association  of  1774,  and  after  September  10,  1775 
they  put  non-exportation  into  effect,  still  hoping  that  com- 
mercial warfare  would  make  Great  Britain  yield.  Their 
efforts  had  no  effect  on  King  George.  He  declared  the 
colonies  to  be  in  a  state  of  rebellion,  and  Parliament 
passed  a  law  ordering  the  seizure  and  confiscation  of  all 
vessels  which  should  be  found  trading  with  the  rebel  col- 


136  THE  NEW  COLONIAL  POLICY 

onies.  The  commercial  restrictions  which  the  colonists 
had  imposed  upon  themselves  were  injuring  their  own 
prosperity  and  were  not  having  the  desired  effect  on  Eng- 
land. On  April  6,  1776  Congress  enacted  a  measure 
throwing  the  commerce  of  the  colonies  open  to  all  nations 
of  the  world  except  Great  Britain.  The  navigation  acts 
and  all  other  commercial  regulations  of  the  British  gov- 
ernment were  nullified  and  discarded.  King  George's  new 
colonial  policy  had  reached  its  culmination.  The  colonists 
had  undertaken  the  management  not  only  of  their  internal 
affairs  but  also  of  their  external  relations.  After  this  the 
declaration  of  independence  was  but  a  formality.  The 
final  step  was  taken  July  4,  1776 ;  the  thirteen  English 
colonies  became  the  United  States  of  America. 

Questions  and  Topics 

1.  Do  you  consider  that  any  of  the  acts  of  Parliament 
from  1763  to  1775  were  just  ?     Give  reasons. 

2.  Explain  why  in  recent  years  stamp  duties  have  not 
met  with  opposition  in  the  United  States. 

3.  Can  you  quote  any  instances  where  public  opinion  has 
controlled  trade  by  concerted  action  similar  to  the  non- 
importation agreement? 

4.  Why  are  our  colonies  more  loyal  to  the  United  States 
than  Massachusetts  was  to  England  ? 

5.  Can  you  outline  any  effective  scheme  other  than  non- 
importation by  which  the  colonists  might  have  protested  ? 

6.  Why  was  smuggling  not  considered  by  the  colonists 
wrong  or  unpatriotic  at  this  period  of  our  history?  Why 
is  it  wrong  now? 

7.  Why  may  it  be  said  that  the  Revolution  was  not  a 
war  between  England  and  the  colonies  but  a  war  between 
George  III  and  the  colonies? 


PART  III 
THE  NEW  NATION 


CHAPTER  VIII 
THE  REVOLUTION 

The  Lack  of  Union.  It  was  one  thing  for  the  Continen- 
tal Congress  to  declare  that  the  thirteen  colonies  were  free 
and  independent  States:  it  was  quite  another  thing  to  make 
Great  Britain  acknowledge  the  truth  of  this  declaration. 
Working  under  the  most  favorable  conditions  the  new 
nation  would  have  found  the  military-  defeat  of  the  mother 
country  an  achievement  of  no  litth;  difficulty;  as  condi- 
tions actually  were  the  task  was  almost  impossible. 

There  was  no  bond  of  union  among  the  colonists  except 
their  objection  to  a  continuation  of  British  rule,  and  they 
were  by  no  means  unanimous  on  this  point.  The  various 
colonies  had  long  possessed  distinct  interests,  and  they 
were  inclined  to  be  extremely  .jealous  of  one  another.  In- 
tercolonial trade,  for  reasons  given  before,  had  always  been 
small,  and  since  there  had  been  no  commercial  relations  of 
importance  there  had  been  little  need  and  little  opportu- 
nity for  the  development  of  close  political  relations.  The 
Continental  Congress,  through  which  the  States  endeavored 
to  act  in  unison,  had  no  legal  standing.  It  quietly  assumed 
the  duty  of  directing  the  war  and  a  few  other  functions  of 
government,  but  such  powers  as  it  exercised  were  exer- 
cised by  the  toleration  of  the  States  and  not  by  their  formal 
consent.  At  the  time  a  committee  was  named  to  draw  up 
the  Declaration  of  Independence  another  committee  was 
appointed  to  draw  up  a  written  instrument  of  government. 
This  committee  formulated  a  document  known  as  the  "Ar- 
ticles of  Confederation,"  which  was  submitted  to  the  Con- 
gress on  July  12,  1776.     There  was  so  much  difference  of 

139 


140 


THE  REVOLUTION 


opinion  among  the  delegates  from  the  several  States  that 
the  Congress  did  not  succeed  in  agreeing  upon  a  draft  of 
the  Articles  until  November  15,  1777,  and  so  great  was  the 
dissension  among  the  States  that  the  Articles  were  not 
accepted  by  all  of  them  until  1781.  The  government  for 
which  the  Articles  provided  was  so  ineffective  that  condi- 
tions were  no  better  than  they  had  been  when  the  Con- 
tinental Congress  was  exercising  its  informal  and  unsanc- 
tioned powers. 

The  lack  of  an  adequate  system  of  government  was  the 


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TDIS  Bill  entitles  ilu 
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Early  Continental  Currency 

chief  obstacle  to  the  efficient  prosecution  of  the  war.  The 
Congress  authorized  the  organization  of  a  "continental 
army,"  which  was  supplemented  by  the  militia  of  the  indi- 
vidual States.  Nearly  all  of  the  States  insisted  upon  re- 
taining their  militia  for  their  own  defense ;  the  main  hope 
of  the  country  rested  upon  the  continental  army.  To  main- 
tain this  army  it  was  necessary  to  pay  the  officers  and 
soldiers  and  to  provide  them  with  food,  clothing,  shelter 
and  military  equipment.  These  things  the  Congress  could 
not  easily  do. 


THE  REVOLUTION 


141 


Financing  the  War.  A  government  has  two  ways  of 
getting  money  to  meet  expenses,  by  taxation  and  by  using 
its  credit.  A  government's  credit  remains  good  only  so  long 
as  it  exercises  the  power  of  taxation.  The  Continental 
Congress  had  no  power  to  tax  the  people  and  it  soon  ex- 
hausted its  credit.  The  States  had  the  power  of  taxation 
but  they  were  reluctant  to  use  their  power  to  aid  the  Con- 
gress.    In  the  first  place  the  people  opposed  taxation;  the 


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Continental  Currency 

primary  cause  of  the  war  was  the  efforts  of  the  British  gov- 
ernment to  tax  them.  In  the  second  place  the  people  of 
one  State  objected  to  paying  taxes  for  the  purpose  of  de- 
fending the  people  of  another  State. 

The  Congress  tried  many  ways  to  secure  the  means  to 
carry  on  the  war.  Its  first  expedient  was  the  issue  of 
paper  money  similar  to  the  bills  of  credit  formerly  issued 
by  the  colonial  governments.  In  June,  1775,  an  issue  of 
2,000,000  Spanish   milled   dollars  was  authorized.     These 


142  THE  REVOLUTION 

were  to  be  redeemed  within  four  years  by  taxes  levied  and 
collected  by  the  States  in  proportion  to  their  population. 
Another  issue  of  $1,000,000  was  voted  in  July  and  $3,000,- 
000  more  before  the  end  of  the  year.  Before  the  Declara- 
tion of  Independence  was  signed  $9,000,000  had  been  issued, 
and  by  October  1778  the  amount  had  reached  $63,000,000. 
In  addition  to  these  issues  of  continental  currency  the  in- 
dividual States  put  out  large  quantities  of  State  bills. 

It  did  not  take  long  for  depreciation  to  begin.  The 
States  endeavored  to  counteract  the  decline  by  enacting 
legal  tender  laws,  but  such  laws  were  of  no  avail.  In  the 
absence  of  a  program  of  vigorous  taxation  and  with  mili- 
tary reverses  creating  doubt  as  to  the  ultimate  success  of 
the  struggle  with  Great  Britain,  the  people  had  little  con- 
fidence in  the  paper  money;  and  as  its  quantity  increased 
their  confidence  grew  less.  Conventions  were  held  in  many 
places  to  fix  prices,  mob  violence  was  employed  to  compel 
dealers  to  accept  the  paper  currency  at  its  face  value, 
buildings  were  broken  open  and  goods  taken  by  force,  but 
in  spite  of  such  methods  the  currency  continued  to  fall  in 
value  until  by  the  end  of  the  year  1778  one  dollar  of  con- 
tinental paper  money  was  worth  less  than  one-fifth  of  a 
dollar  in  specie.  When  agents  of  Congress  wanted  to  buy 
goods  worth  one  hundred  dollars  they  had  to  give  notes 
amounting  to  more  than  five  hundred  dollars. 

Meanwhile  the  Congress  had  endeavored  to  obtain 
money  by  other  means.  In  October,  1776,  a  loan  of 
$5,000,000,  bearing  interest  at  the  rate  of  four  per  cent 
was  authorized.  The  credit  of  the  government  was  too 
weak  to  make  such  a  loan  attractive  to  investors.  Subse- 
quent loans  were  tried  at  six  per  cent  but  they  too  failed  to 
attract  private  capitalists.  Benjamin  Franklin  and  John 
Jay  succeeded  however  in  borrowing  several  million  dol- 
lars from  the  French  and  Spanish  governments. 


THE  REVOLUTION  143 

The  Congress  tried  a  government  lottery,  which  pro- 
duced but  little  because  the  prizes  were  only  four  per  cent 
certificates  of  indebtedness.  Direct  requisitions  for  money 
were  made  upon  the  States,  but  no  State  paid  its  allotment. 
Some  money  was  raised  by  confiscating  the  property  of 
Tories  who  sympathized  with  Great  Britain.  Robert 
Morris  used  his  personal  influence  and  credit  more  than 
once  to  obtain  hard  money  when  the  outlook  was  darkest. 

Early  in  1779  the  Congress  requested  the  States  to 
furnish  supplies  of  flour,  beef,  pork,  rum,  corn  and  hay. 
This  system  of  obtaining  provisions  called  for  means  of 
transportation  which  the  States  did  not  have,  and  it  also 
opened  the  door  for  evasion  and  fraud.  The  States  em- 
powered agents  to  seize  supplies  wherever  needed.  For 
these  impressed  goods  the  agents  gave  certificates  of  in- 
debtedness bearing  interest.  Seizures  of  this  nature 
caused  much  irritation  and  resentment  and  led  to  the  con- 
cealment of  supplies,  the  deliberate  wrecking  of  wagons, 
and  the  withdrawal  of  horses  and  oxen  from  the  reach  of 
the  government  agents. 

The  Congress  continued  to  issue  paper  money  through- 
out the  year  1779,  the  total  authorized  issues  finally  reach- 
ing forty,  and  the  amount  about  $242,000,000.  The  indi- 
vidual States  issued  about  $210,000,000.  Large  quantities 
of  counterfeit  notes  were  put  into  circulation  by  British 
agents  and  by  criminals.  By  1780  one  hundred  dollars  in 
silver  could  be  exchanged  for  five  thousand  dollars  in  con- 
tinental currency,  and  it  was  useless  for  Congress  to  issue 
more.  Prices  of  merchandise  were  fantastic.  In  October, 
1780,  corn  sold  in  Boston  for  $180  a  bushel,  tea  at  $90  a 
pound,  butter  $12  a  pound  and  flour  $1,575  a  barrel. 
Samuel  Adams  bought  a  suit  of  clothes  and  a  hat  for 
$2,000.  The  pay  of  the  soldiers,  nominally  seven  dollars 
a  month,  had  fallen  to  less  than  one-fifth  of  a  dollar.     The 


144 


THE  REVOLUTION 


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A   Page   of   Washington's   Account   Book,    Showing   a   Complete 
Summary  of  His  Account  with  Congress  from  1775  to  1783. 


THE  REVOLUTION  145 

final  campai^  of  Yorktown  would  have  been  impossible 
had  not  Rochambeau  loaned  the  government  specie  for  the 
back  pay  of  Washington's  army. 

With  the  prevailing  methods  of  finance  it  is  little  won- 
der that  Washington's  troops  suffered  from  hunger  and 
exposure.  There  was  plenty  of  clothing  and  provisions  in 
the  country;  the  misery  of  the  soldiers  was  due  solely  to 
the  lack  of  means  to  purchase  these  things  from  their 
owners.  While  the  little  continental  army  was  freezing 
and  starving  at  Valley  Forge  the  British  army  in  Phila- 
delphia, twenty  miles  away,  was  obtaining  supplies  in 
abundance  from  New  Jersey  and  Pennsylvania.  It  was 
useless  for  the  Congress  to  resolve  that  any  person  refusing 
to  accept  the  bills  of  credit  should  be  "deemed,  published 
and  treated  as  an  enemy  of  the  Country."  No  resolutions 
of  the  Congress  could  induce  people  to  give  up  their  wealth 
for  promises  to  pay  in  which  they  had  no  confidence. 

The  depreciation  of  the  currency  not  only  multiplied  the 
difficulties  of  the  weak  government;  it  caused  distress 
among  the  people.  Debtors  took  advantage  of  the  legal 
tender  laws  just  as  they  had  done  when  the  colonial  bills 
of  credit  depreciated,  settling  their  debts  by  returning  but 
a  small  portion  of  the  value  they  had  received.  Adminis- 
trators of  estates,  guardians  of  orphans  and  other  trustees 
defrauded  their  charges  by  making  settlements  in  the  de- 
preciated notes.  The  fluctuating  value  of  the  currency 
gave  rise  to  much  speculation.  Depreciation  not  being  so 
rapid  in  some  sections  as  in  others,  unscrupulous  individ- 
uals made  large  fortunes  by  selling  goods  where  the  money 
was  lowest  in  value  and  then  quickly  buying  where  it  was 
highest.  Washington  wrote,  "Speculation,  peculation,  en- 
grossing, forestalling  afford  too  many  melancholy  proofs  of 
the  decay  of  public  virtue.  ,  .  .  Nothing  I  am  convinced 
but  the  depreciation  of  the  currency  .  .  .  aided  by  stock- 


146  THE  REVOLUTION 

jobbing  and  party  dissensions,  has  fed  the  hopes  of  the 
enemy." 

In  March,  1780,  when  one  hundred  dollars  in  continental 
bills  had  a  value  of  about  one  dollar  in  specie  Congress 
urged  that  the  States  offer  to  redeem  the  $200,000,000  of 
notes  outstanding  with  bills  of  "new  tenor"  at  the  rate  of 
one  dollar  of  the  new  for  forty  of  the  old.  This  was  re- 
pudiation, an  offer  to  settle  obligations  of  $200,000,000  for 
$5,000,000,  New  tenor  notes  were  issued  and  exchanged 
for  about  $120,000,000  of  the  old  notes.  The  new  notes 
quickly  began  to  depreciate.  In  a  short  time  virtually  all 
of  the  continental  currency  disappeared  from  circulation. 
The  expression  "not  worth  a  continental"  still  remains 
as  a  synonym  for  utter  worthlessness.  In  1790  the  new 
government  offered  to  accept  the  continental  currency  in 
payment  for  government  bonds  at  the  rate  of  one  hundred 
to  one,  and  notes  to  the  amount  of  $6,000,000  were  received 
and  canceled.     The  others  had  been  lost  or  destroyed. 

The  cost  of  the  war  amounted  in  specie  to  about  $135,- 
000,000.  To  meet  this  cost,  notes,  bonds  and  other  evi- 
dences of  debt  were  issued  to  the  amount  of  $650,000,000. 
The  distress  caused  by  the  depreciation  of  the  currency  was 
much  greater  than  any  distress  which  would  have  been 
caused  by  a  thorough  system  of  taxation.  The  people  had 
to  contribute  the  supplies  which  the  army  consumed  re- 
gardless of  the  method  by  which  the  supplies  were  obtained. 
Had  they  been  obtained  through  an  orderly  system  of  taxa- 
tion the  cost  would  have  been  no  greater  and  it  could  have 
been  equitably  distributed.  Moreover  had  ample  supplies 
been  constantly  available  the  war  could  probably  have  been 
w'on  much  sooner  and  consequently  at  a  smaller  cost. 

Industrial  Conditions  During  the  Revolution.  What 
made  the  difficulties  of  Washington  and  the  Congress  all 
the  harder  to  bear  was  the  fact  that  after  1776  the  United 
States  was  fairly  prosperous.     Before  hostilities  began  the 


THE  REVOLUTION  147 

voluntary  restriction  of  commerce  by  the  colonists  and  the 
prohibitory  regulations  of  the  British  government  had 
caused  an  economic  depression,  and  the  outbreak  of  actual 
war  tended  still  further  to  dislocate  industry.  But  once 
the  people  became  adjusted  to  the  new  state  of  affairs  there 
was  a  revival  of  industry  and,  in  spite  of  the  activity  of 
the  British  navy,  a  substantial  recovery  of  commerce. 

With  the  exception  of  the  indigo  planters  of  South  Caro- 
lina, who  had  been  dependent  upon  British  bounties  for 
their  earnings,  the  farming  interests  of  the  country  suf- 
fered little  injury  from  the  war.  Agriculture  continued 
throughout  the  conflict  with  little  change.  Only  small  por- 
tions of  the  settled  country  districts  were  disturbed  by  the 
operations  of  opposing  armies.  In  the  South  there  was  no 
military  activity  of  any  consequence  until  1780;  the  Brit- 
ish were  driven  out  of  Boston  early  in  1776 ;  the  British 
armies  in  the  Middle  States  were  inactive  much  of  the 
time,  and  since  they  were  plentifully  supplied  with  money 
from  England  their  presence  in  Philadelphia  and  New 
York  served  to  stimulate  rather  than  depress  agriculture. 
The  French  army  brought  over  a  large  quantity  of  gold 
and  silver  which  passed  into  circulation  through  the  hands 
of  the  New  England  farmers.  Until  methods  of  conduct- 
ing commerce  were  perfected  the  tobacco  planters  of  Vir- 
ginia, Maryland  and  North  Carolina  suffered  some  loss, 
but  their  distress  was  not  of  long  duration. 

Though  agriculture  prospered,  another  important 
branch  of  colonial  industry  was  virtually  destroyed.  This 
was  the  fisheries.  English  naval  vessels  haunted  the  waters 
along  the  coasts  of  New  England  and  Newfoundland,  mak- 
ing it  impossible  for  the  Americans  to  carry  on  fishing  oper- 
ations. Many  of  the  fishing  vessels  were  converted  into 
privateers,  and  the  fishermen,  as  crews  of  these  plundering 
ships,  found  a  life  as  full  of  excitement  and  danger  as  their 
former  occupation  had  been.     The  destruction  of  the  fish- 


148  THE  REVOLUTION 

ing  industry  worked  a  hardship  upon  the  West  Indian 
sugar  planters  who  had  been  accustomed  to  exchange  mo- 
lasses and  sugar  for  New  England  fish.  The  decline  in  the 
imports  of  molasses  injured  the  rum  distilling  business  and 
led  to  the  partial  substitution  of  whisky  made  from  corn, 
irye  and  other  grains  for  the  long  familiar  New  England 
and  Jamaica  rum. 

One  extremely  important  effect  of  the  war  was  its  stim- 
ulation of  manufacturing  in  America.  Cut  off  from  the 
customary  source  of  manufactured  goods  the  people  were 
forced  to  make  for  themselves  many  of  the  articles  which 
they  had  formerly  imported.  Tanneries,  fulling-mills,  and 
iron  works  increased  in  number  and  extended  their  pro- 
duction. Large  buildings  were  erected  by  enterprising 
capitalists  in  Boston,  Philadelphia  and  Baltimore,  and  peo- 
ple hired  to  operate  looms  weaving  linen  and  woolen  cloth. 
The  spinning  wheels,  looms,  and  knitting  needles  of  north- 
ern households  were  busier  than  ever  before.  In  the  South 
the  cultivation  of  cotton,  which  for  several  years  had  been 
carried  on  in  an  experimental  way,  was  extended  until 
enough  fiber  was  produced  to  supply  a  large  part  of  the  ma- 
terial for  clothing  the  negro  slaves.  Muskets  and  cannon 
were  made  in  Massachusetts,  New  Jersey  and  Pennsylvania 
factories.  The  Sterling  iron  works  in  New  York  east 
several  cannon  and  also  made  the  great  iron  chain  which 
was  stretched  across  the  Hudson  River  at  West  Point  to  pre- 
vent the  British  fleet  from  passing  up  the  stream.  The 
lead  deposits  at  Chiswell,  Virginia,  were  worked  vigorously 
to  secure  material  for  bullets.  Additional  salt  works  were 
operated  along  the  coast  to  separate  salt  from  the  water 
of  the  sea.  This  indispensable  article  became  very  scarce, 
its  price  advancing  from  eighteen  pence  a  bushel  in  1774 
to  six  silver  dollars  a  bushel  in  1781. 

Commerce   During  the   War.    When   the   Continental 
Congress  opened  the  ports  of  the  thirteen  colonies  to  the 


THE  REVOLUTION  149 

world  in  April,  1776,  merchants  and  shipowners  of  Holland, 
France  and  Spain  began  at  once  to  seek  their  way  to 
American  markets.  Since  the  colonists  had  imported  but 
little  during  the  preceding  year,  their  stock  of  foreign 
goods  had  run  low  and  they  were  willing  and  eager  to  buy. 
At  first  Congress  forbade  the  importation  of  British  goods, 
but  this  prohibition  was  soon  removed,  all  imports  being 
gladly  received  whatever  their  origin.  Dutch,  French  and 
American  ships  slipped  past  the  British  cruisers,  bringing 
cargoes  of  clothing,  war  materials,  metal  wares  and  salt  into 
American  ports.  Large  quantities  of  English  manufac- 
tures were  landed  in  Nova  Scotia  whence  they  easily  found 
a  way  to  the  markets  of  the  United  States.  While  the 
British  were  holding  New  York,  Philadelphia  and  Savan- 
nah a  constant  stream  of  imports  flowed  into  those  cities 
in  British  ships. 

Many  American  merchant  vessels  as  well  as  vessels  of 
France  and  Holland  were  captured  by  the  British  ships 
of  war.  In  retaliation  the  Continental  Congress  and  the 
governing  authorities  of  the  States  sent  out  privateers  to 
prey  upon  the  commerce  of  Great  Britain.  The  Congress 
also  managed  to  maintain  a  small  navy  which  harried  the 
shipping  of  the  enemy  and  also  gave  a  good  account  of 
itself  in  various  engagements  with  vessels  of  the  royal 
navy.  It  is  estimated  that  as  many  as  two  thousand 
American  privateers  were  sent  out  during  the  war.  The 
English  ships  which  they  took  as  prizes  replaced  the  Ameri- 
can tonnage  captured  by  the  British  fleet.  The  privateers 
were  used  also  as  merchant  ships  bringing  in  not  only  car- 
goes of  captured  goods  but  cargoes  of  goods  purchased  in 
European  markets.  The  Cabots  of  Beverly  and  the  Derbys 
of  Salem  became  rich  from  the  successful  operation  of  the 
armed  ships  which  they  sent  to  sea  during  the  Revolution. 

The  vessels  which  brought  imports  to  America  sailed 
away  laden  with  American  products.     Hundreds  of  ship- 


150  THE  REVOLUTION 

loads  of  tobacco,  rice  and  flour  went  to  the  ports  of  Europe 
and  the  "West  Indies.  The  Continental  Congress  authorized 
its  agents  to  buy  up  produce  and  ship  it  abroad  to  exchange 
for  money  and  military  supplies.  Holland,  France  and 
Spain  were  eager  to  obtain  American  products.  American 
tobacco  even  found  its  way  to  English  markets  regardless 
of  the  laws  forbidding  its  importation.  Though  the  peo- 
ple of  the  northern  States  could  no  longer  catch  fish  to 
send  to  the  West  Indies,  they  could  and  did  export  flour, 
wheat  and  pickled  beef  and  pork.  The  Dutch  island  of 
St.  Eustatia  and  the  Danish  islands  of  St.  Croix  and  St. 
Thomas  were  favorite  places  for  the  exchange  of  American 
products  for  European  goods.  The  English  sugar  planters 
did  not  hesitate  to  buy  American  flour  and  meat,  some- 
times receiving  openly  the  American  ships  but  more  often 
obtaining  the  merchandise  indirectly  through  Dutch  mer- 
chants and  shipowners. 

The  exports  of  tobacco,  rice  and  flour  brought  good 
prices.  Since  the  total  exports  were  greater  in  value  than 
the  imports  the  balance  in  favor  of  the  American  traders 
was  paid  in  coin.  The  British  and  French  governments 
sent  over  large  sums  to  pay  for  the  food  supplies'  purchased 
for  their  armies.  After  1778  the  Americans  for  the  first 
time  had  an  abundance  of  gold  and  silver  money.  The 
poverty  of  the  public  treasury  was  not  due  to  a  lack  of 
hard  money  in  the  country  but  to  the  neglect  of  taxation 
and  the  unwillingness  of  the  people  to  make  loans  to  the 
government.  The  demand  for  goods  and  the  abundance  of 
coin  imparted  a  brisk  activity  to  domestic  trade.  "When 
the  war  came  to  an  end  the  people  were  singularly  prosper- 
ous. In  fact  there  was  much  concern  among  thoughtful 
men  about  the  luxury  and  extravagance  of  the  population. 
Franklin  wrote  in  1779,  "The  extravagant  luxury  of  our 
country  in  the  midst  of  all  its  distress  is  to  me  amazing." 

One  branch  of  trade  which  did  not  prosper  was  the  slave 


THE  REVOLUTION  151 

trade.  The  Continental  Association  in  1774  had  contained 
an  article  by  which  the  colonists  agreed  to  stop  the  com- 
merce in  negroes.  In  April,  1776,  the  Congress  voted  that 
"no  slave  be  imported  into  any  of  the  thirteen  colonies." 
However  the  States  and  not  the  Congress  had  the  right  to 
regulate  commerce.  The  ideals  expressed  in  the  Declara- 
tion of  Independence  reflected  the  opposition  of  many  peo- 


Benjamin  Franklin 
pie  in  the  northern  States  to  human  slavery.  In  1780 
Massachusetts  abolished  slavery,  and  was  shortly  after- 
wards followed  in  this  action  by  New  Hampshire  and  Con- 
necticut. In  Virginia  and  Maryland  there  was  a  wide- 
spread belief  that  slavery  was  immoral  and  uneconomical. 
This  belief  was  not  shared  however  by  the  people  of  the 
Carolinas  and  Georgia.     Many  persons,  both  North   and 


152  THE  REVOLUTION 

South  believed  that  slavery  was  dying  out,  and  for  the 
time  being  it  seemed  that  they  were  right,  but  the  begin- 
ning of  extensive  cotton  culture  in  the  South  was  soon  to 
destroy  their  hopes  and  give  the  institution  a  fresh  and 
stronger  hold. 

Occupation  of  the  West.  One  of  the  most  important 
events  of  the  Revolutionary  period  was  the  occupation  and 
conquest  of  the  West  by  the  American  people.  By  the 
treaty  of  1763  Great  Britain  secured  undisputed  posses- 
sion of  the  great  area  of  land  stretching  from  the  Appala- 
chian highland  to  the  Mississippi  River.  King  George,  in- 
stead of  encouraging  the  occupation  of  this  territory  by 
settlers,  issued  a  proclamation  shortly  after  the  treaty  was 
signed,  forbidding  colonial  governors  to  grant  lands  "be- 
yond the  head  or  sources  of  any  of  the  rivers  which  fall 
into  the  Atlantic  Ocean  from  the  west  and  northwest," 
and  prohibiting  the  settlement  of  these  lands  by  his  sub- 
jects. His  chief  object  was  to  maintain  the  fur  trade, 
which  was  sure  to  decline  if  the  forest  lands  were  cleared 
and  cultivated.  He  was  afraid  too  that  many  people  living 
along  the  coast  might  decide  to  emigrate  to  the  fertile 
western  lands  out  of  reach  of  his  "law  and  government." 
Since  western  settlers  would  be  obliged,  because  of  the 
great  distance  of  their  homes  from  the  sea,  to  produce  their 
own  manufactures,  the  market  far  the  products  of  English 
industries  would  be  decreased.  Plainly  colonies  west  of 
the  Appalachian  highland  would  not  conform  to  the  pre- 
vailing mercantilist  notions  of  what  colonies  ought  to  be. 

Notwithstanding  King  George's  wish  to  keep  the  col- 
onists near  the  sea,  the  years  between  1763  and  1775  wit- 
nessed a  gradual  movement  of  settlers  to  the  west,  and  in 
many  sections  the  emigrants  took  up  .lands  in  the  pro- 
hibited districts.  The  western  movement  in  southern  New 
York  and  northern'  Pennsylvania  was  necessarily  slow  and 
cautious  because  the  region  was  held  by  the  Six  Nations, 


THE  REVOLUTION  153 

a  part  of  the  Indian  tribes  making  up  the  powerful  Iro- 
quois confederacy.  In  1759  English  provincial  forces 
erected  Fort  Stanwix  near  the  present  site  of  the  city  of 
Rome,  New  York,  and  for  more  than  a  score  of  years  this 
post  marked  the  western  limit  of  white  settlements  in  New 
York. 

South  of  New  York  the  resistance  of  Indians  to  the  tide 


Daniel  Boone 

of  emigration  was  not  so  strong.  On  the  site  of  Fort 
Duquesne  General  Forbes 's  troops  founded  the  settlement 
of  Pittsburgh,  and  constructed  Fort  Pitt  for  its  defense. 
The  Indians  in  this  region  were  soon  subdued.  Emigrants 
coming  up  the  Potomac  Valley  to  Fort  Cumberland  crossed 
the  mountain  pass  to  the  Youghiogheny  and  iMonongahela 
valleys.  Other  settlers  traveled  overland  from  Philadel- 
phia by  way  of  Forbes  Road.     By  1775  the  region  south  of 


154  THE  REVOLUTION 

this  road  between  Fort  Cumberland  and  Pittsburg  was  all 
occupied,  and  the  line  of  settlements  was  creeping  down  the 
southern  bank  of  the  Ohio  River.  This  stream  afforded  an 
easy  highway  to  the  unsettled  regions  farther  west,  but 
the  presence  of  large  numbers  of  Indians  on  its  northern 
shore  tended  to  check  emigration  by  this  route. 

Farther  south  people  from  the  Carolinas  and  Virginia 
were  making  their  way  to  Kentucky  and  Tennessee.     By 
1770  adventurous  pioneers  had  crossed  the  mountains  and 
taken  up  lands  in  the  valleys  of  the  Watauga,  Holston 
and  Clinch  Rivers,  all  tributaries  of  the  Tennessee.     In 
1769  Daniel  Boone  of  North  Carolina  made  his  way  through 
Cumberland  Gap  to  central  Kentucky,  staying  for  more 
than  a  year  in  the  wonderful  hunting  grounds  which  be- 
fore his  arrival  few  white  men  had  disturbed.     Kentucky, 
though  visited  frequently  by  parties  of  the  Iroquois  and 
Cherokee  Indians,  was  the  permanent  home  of  no  Indian 
nation,  and  of  all  the  western  country  it  offered  the  most 
favorable   conditions   for   settlement.     Boone   returned   to 
his  home  in  North  Carolina  in  1771,  and  two  years  later 
he  and  six  other  men  started  with  their  families  for  Ken- 
tucky.    Before  reaching  Cumberland  Gap  they  were  at- 
tacked by  Indians  and  a  number  of  the  party,  including 
Boone's  seventeen-year  old  son,  were  killed.     The  survivors 
decided  to  live  in  the  white  settlements  of  the  Clinch  val- 
ley until   others   joined    them.     In    1774    Judge   Richard 
Henderson  of  North  Carolina  organized  the  Transylvania 
Company  for  the  purpose  of  settling  the  region  bounded  by 
the  Ohio,  Cumberland  and  Kentucky  Rivers.     His  plan  was 
to  secure  a  title  to  the  land  from  some  of  its  Indian  claim- 
ants, send  out  settlers,  and  make  a  fortune  from  the  sale 
of  farms  and  from  quitrents,  very  much  after  the  plan  of 
the  commercial  companies  which  sent  the  first  colonists  to 
America.     Negotiations   were   opened   with   the    Cherokee 
Indians,  and  in  March  1775  the  company  acquired  their 
title  to  the  land.     Before  the  negotiations  were  completed 


THE  REVOLUTION 


155 


Henderson  sent  Boone,  at  the  head  of  a  party  of  woods- 
men, to  blaze  a  path  through  the  wilderness  and  choose  a 
location  for  the  first  settlement.  By  the  middle  of  April 
Boone  had  finished  the  trail  and  built  a  small  log  fort  on 


,^^^j^^jAW1^ 

1 

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i 

m 

1 

mm 

^^^^ 

1 

tti^^'^^^SSK^SSf^'^^^-/  V^^MHMHi^Hrt 

^HH 

"  1 

Boonesborough 

Reprinted  from  MrKinley's  Illustrated  Topics  for 
American  History,  by  permission  of  Prof.  A.  E. 
McKinley. 

the  Kentucky  River,  the  beginning  of  the  settlement  of 
Boonesborough.  Henderson  soon  came  with  more  men,  and 
Boone  hastened  back  to  the  Clinch  River  for  the  waiting 
families,  who  two  years  before  had  started  under  his 
guidance  for  Kentucky.     Before  the  end  of  the  year  the 


156  THE  REVOLUTION 

settlements  of  Harrod's  Town  and  Boiling  Spring  were 
founded.  Boone's  trail  became  the  Wilderness  Road,  and 
it  was  soon  being  traveled  by  hundreds  of  families,  who, 
discouraged  by  the  hard  times  in  the  East  during  the  first 
two  years  of  the  Revolutionary  War,  decided  to  brave  the 
terrors  of  the  wilderness  and  make  new  homes  on  the  banks 
of  the  Kentucky  and  Tennessee  Rivers.  The  State  of  Vir- 
ginia protested  the  Transylvania  Company's  title  and  Hen- 
derson's dreams  of  wealth  vanished.  The  settlers  were  not 
disturbed  however,  and  their  rights  to  the  land  which  they 
occupied  were  confirmed.  Among  these  early  Kentucky 
settlers  were  the  grandparents  of  Abraham  Lincoln.     His 


Pack-Horses 

paternal  grandfather  whose  name  was  also  Abraham  Lin- 
coln, was  murdered  by  Indians  while  working  in  his  fields 
with  his  sons.  Many  settlers  went  down  the  Ohio  River 
from  Pittsburgh  to  take  up  lands  in  Kentucky.  A  settle- 
ment established  at  the  falls  of  the  Ohio  was  incorporated 
as  the  town  of  Louisville  by  an  act  of  the  Virginia  legisla- 
ture in  1780. 

The  life  of  these  early  frontiersmen  was  not  an  easy  one. 
Their  difficulties  were  not  unlike  the  difficulties  of  the 
European  colonists  who  first  came  to  America.     Far  from 


THE  REVOLUTION  157 

civilized  communities,  they  had  to  depend  upon  their  in- 
dividual efforts  to  satisfy  their  daily  wants.  Their  first 
task  was  to  build  log  cabins,  and  perhaps  a  block-house  and 
stockade  for  protection  against  the  Indians.  The  open- 
ings between  the  logs  of  their  cabins  they  stopped  with 
clay.  A  large  fireplace  at  the  end  of  the  single  room 
served  both  for  cooking  and  for  heating.  Their  rifles  sup- 
plied much  of  their  food  during  the  first  year  until  some  of 
the  forest  could  be  cleared  away  and  the  soil  planted  with 
corn  and  vegetables.  They  clothed  themselves  with  buck- 
skin and  on  their  feet  wore  moccasins.  After  a  few  years 
of  persevering  industry,  their  fields,  orchards  and  gar- 
dens, and  their  droves  of  cattle  and  hogs  abundantly  sup- 
plied their  wants  for  ordinary  material  comforts.  Their 
chief  problem  was  to  secure  such  indispensable  articles  as 
salt,  gunpowder,  and  metal  tools  and  utensils,  which  it  was 
impossible  for  them  to  produce  themselves.  A  wearisome 
and  dangerous  journey  to  some  eastern  city,  with  pack- 
horses  bearing  peltry,  ginseng  and  other  light  and  valua- 
ble products,  was  the  only  way  of  meeting  this  problem 
until  the  country  was  sufficiently  settled  for  the  construc- 
tion of  adequate  transportation  facilities  and  the  estab- 
lishment of  an  organized  commerce. 

Conquest  of  the  West.  When  the  Revolutionary  War 
began  both  the  Iroquois  and  the  Cherokee  Indians  joined 
the  British.  Urged  on  by  British  agents  and  often  aided 
by  British  troops  and  officers  the  Indians  tried  to  drive  the 
white  settlers  back  to  the  sea.  In  New  York  and  north- 
eastern Pennsylvania  the  Six  Nations  pillaged  and  burned 
dozens  of  settlements,  cruelly  slaughtering  hundreds  of 
men,  women  and  children.  One  successful  expedition  was 
made  against  the  Indians  in  1779,  when  General  Sullivan 
led  a  small  army  from  the  Wyoming  Valley  into  the  heart 
of  the  Indian  country  about  Seneca  and  Cayuga  lakes, 
where  his  men  destroyed  the  growing  crops  of  the  Indians 


158  THE  REVOLUTION 

and  burned  many  of  their  villages.  However  this  did  not 
put  an  end  to  the  depredations  of  the  Indians,  who  con- 
tinued their  border  massacres  until  the  war  ended. 

On  the  Carolina  frontier  the  Watauga  settlers,  aided  by 
a  small  force  of  militia  from  Virginia  and  the  Carolinas, 
overcame  the  Cherokee  tribes,  forcing  them  to  give  up  a 
portion  of  their  lands. 

Every  settlement  along  the  Ohio  River  and  in  Kentucky 
was  attacked  by  the  savages.  Only  too  often  their  assaults 
were  successful.  Had  it  not  been  for  George  Rogers 
Clark  the  white  settlers  of  these  regions  would  probably 
have  been  exterminated  and  Great  Britain  might  have  con- 
tinued in  nominal  possession  of  the  region  between  the 
mountains  and  the  Mississippi.  Clark  made  a  journey 
from  his  home  in  Albemarle  County,  Virginia,  to  Kentucky 
in  1775  and  again  in  1776.  Aroused  by  the  Indian  massa- 
cres instigated  by  the  British  he  went  to  Patrick  Henry, 
the  Governor  of  Virginia,  with  plans  for  a  war  against  the 
Indians  and  for  the  expulsion  of  the  British  from  the 
Ohio  Valley.  Though  Governor  Henrj^  could  not  provide 
Clark  with  troops  he  gave  him  a  colonel's  commission  and 
twelve  hundred  pounds  in  Virginia  paper  currency,  and  au- 
thorized him  to  raise  several  companies  of  militia  for  the 
defense  of  Kentucky  against  the  Indians  and  for  the  cap- 
ture of  the  British  posts  in  the  West.  Proceeding  to  Fort 
Pitt  in  1778  Clark  raised  a  small  force  and  went  down 
the  Ohio  River  to  a  point  near  the  present  site  of  Louis- 
ville, where  he  was  joined  by  a  number  of  Kentucky 
frontiersmen — "big  knives" — most  of  them  seeking  re- 
venge for  the  murder  of  relatives  and  friends  by  the  sav- 
ages. He  boldly  led  his  little  army  into  the  enemy's 
country.  He  seized  the  small  French  settlements  of  Kas- 
kaskia  and  Cahokia  on  the  IMississippi,  overawed  the  In- 
dians and  compelled  them  to  make  peace.  In  February, 
1779,  he  captured  the  British  garrison  at  Vincennes  on  the 


THE  REVOLUTION  159 

Wabash  River.  Detroit,  Sandusky  and  a  few  other  posts 
on  the  Great  Lakes  were  the  only  points  of  importance  in 
the  West  remaining  in  the  hands  of  the  British. 

Disagreements  of  the  States  over  Western  Lands.  In 
the  autumn  of  1776  the  Virginia  legislature  enacted  a  res- 
olution declaring  Kentucky  to  be  a  county  of  Virginia.  In 
October,  1778,  the  region  northwest  of  the  Ohio  was  like- 
wise declared  to  be  a  part  of  Virginia  and  named  the 
county  of  Illinois.  North  Carolina  claimed  the  region  now 
composing  the  State  of  Tennessee.  Both  States  opened  land 
offices,  offering  to  sell  large  tracts  of  land  at  low  prices  and 
on  easy  terms.  Clark  and  his  men  were  rewarded  with 
grants  of  land  north  of  the  Ohio  River,  and  Virginia  began 
to  pay  off  her  soldiers  in  the  continental  armies  with  sim- 
ilar grants. 

The  claims  of  Virginia  to  the  region  north  of  the  Ohio 
were  disputed  by  New  York,  Massachusetts  and  Connecti- 
cut. New  York  claimed  part  of  the  territory  by  virtue 
of  treaties  with  the  Indians,  the  other  two  States  based 
their  claims  on  original  charter  rights.  Connecticut  and 
Massachusetts  also  claimed  title  to  lands  in  unsettled  por- 
tions of  New  York  and  Pennsylvania.  Only  five  States, 
New  Hampshire,  Rhode  Island,  New  Jersey,  Delaware  and 
Maryland  had  definite  western  boundaries.  The  people  of 
these  States  opposed  the  claims  of  the  other  eight  States 
to  unoccupied  western  lands,  and  suggested  that  all  this 
territory  be  ceded  to  the  United  States  to  be  used  for  the 
benefit  of  the  whole  country.  Unless  the  land  should  be 
used  for  the  common  good  the  States  with  no  claims  would 
be  compelled  to  pay  their  share  of  the  war  debt  entirely  by 
taxation.  IMaryland  flatly  refused  to  ratify  the  Articles  of 
Confederation  unless  the  pretentious  claims  of  Virginia 
were  disallowed.  In  1778  New  York  ceded  her  claims  to 
lands  west  of  Pennsylvania  to  the  United  States.  Early 
in  1781   Virginia  offered  to  surrender  her  rights  to  the 


160  THE  REVOLUTION 

region  northwest  of  the  Ohio,  retaining  only  lands  already 
granted  or  promised  to  soldiers.  The  cession  was  not  com- 
pleted until  1784.  Connecticut  gave  up  all  her  western 
lands  with  the  exception  of  a  strip  extending  one  hundred 
and  twenty  miles  west  of  the  Pennsylvania  boundary.  The 
United  States  thus  came  into  possessin  of  a  large  and  valu- 
able public  domain.  Kentucky  remained  a  part  of  Vir- 
ginia until  becoming  a  separate  State  in  1792.  The  States 
south  of  Virginia  gradually  gave  up  their  jurisdiction  over 
western  lands,  though  the  land  itself  was  nearly  all  dis- 
posed of  before  this  action  was  taken.  Connecticut  gave 
up  jurisdiction  over  her  "Western  Reserve"  in  1800  after 
having  given  several  thousand  acres  to  her  citizens  whose 
homes  were  destroyed  during  the  Revolution  and  selling 
the  remainder  for  $1,200,000,  the  money  being  used  to 
establish  the  Connecticut  educational  fund. 

The  End  of  the  War.  Though  Cornwallis  surrendered 
at  Yorktown  on  October  19,  1781,  it  was  not  until  two 
years  later  that  the  definitive  treaty  of  peace  with  Great 
Britain  was  signed.  King  George  stubbornly  opposed  giv- 
ing up  part  of  his  empire,  but  Parliament  finally  took  ac- 
tion and  negotiations  were  opened.  A  provisional  treaty 
was  signed  on  November  30,  1782,  and  the  final  treaty  on 
September  3,  1783,  after  the  completion  of  negotiations 
between  England  and  France. 

Great  Britain  acknowledged  the  independence  of  the 
United  States.  The  American  peace  commissioners  ob- 
tained virtually  all  of  their  territorial  demands,  though 
the  treaty  described  the  northern  and  southern  boundaries 
of  the  United  States  in  such  terms  as  later  to  cause  con- 
troversies with  both  Great  Britain  and  Spain.  The  treaty 
contained  a  secret  article  stipulating  that  if  Great  Britain 
should  retain  the  province  of  Florida  the  southern  boun- 
dary of  the  United  States  should  be  farther  north  than 
should  be  the  case  if  Florida  were  returned  to  Spain.     In 


THE  REVOLUTION 


161 


the  treaty  between  Spain  and  Great  Britain  Florida  was 
returned  to  the  former  country,  and  Spain  refused  to  rec- 


THE  UHTTED  STATES 

PEACE  OF  1783 

6CALE  OF  MILES 


agnize  the  provisional  boundary  agreement  of  the  secret 
article.     The  controversy  over  the  Florida  boundary  wa£ 


162  THE  REVOLUTION 

not  settled  until  1819  when  the  United  States  purchased 
the  province  from  the  Spanish  government.  The  treaty 
of  peace  made  no  mention  of  commercial  relations  between 
the  two  countries.  Upon  the  insistence  of  John  Adams 
Great  Britain  acknowledged  the  right  of  the  people  of  the 
United  States  to  take  fish  upon  the  Newfoundland  banks, 
in  the  Gulf  of  St.  Lawrence,  and  along  the  coast  of  New- 
foundland, and  even  gave  the  American  fishermen  the 
privilege  of  drying  fish  on  unsettled  portions  of  the  shores 
of  Nova  Scotia  and  Labrador.  These  concessions  were  of 
the  highest  importance.  Both  countries  agreed  that  noth- 
ing should  be  done  to  obstruct  the  collection  of  debts  con- 
tracted before  the  war,  and  American  delegates  agreed  that 
the  Congress  should  recommend  that  the  legislatures  of  the 
various  States  restore  the  confiscated  property  of  American 
loyalists  who  had  objected  to  the  separation  from  Great 
Britain.  Finally  it  was  agreed  that  the  "navigation  of 
the  river  INIississippi,  from  its  source  to  the  ocean,  shall 
forever  remain  free  and  open  to  the  subjects  of  Great 
Britain  and  the  citizens  of  the  United  States."  By  the 
treaty  of  1763  Great  Britain  had  received  from  Spain  the 
right  of  free  navigation  of  the  Mississippi,  and  this  right 
she  now  agreed  to  share  with  the  United  States.  Since 
Spain  controlled  all  of  the  west  bank  of  the  Mississippi  and 
the  east  bank  south  of  the  thirty-first  parallel  of  latitude, 
this  section  of  the  treaty  amounted  to  but  little  without 
Spain's  assent  to  it.  The  Government  of  the  United  States 
soon  found  out  that  Spain  was  not  disposed  to  recognize 
the  right  of  the  American  people  freely  to  use  the  great 
river. 

Freed  from  British  rule  the  United  States  assumed  a 
place  among  the  nations  of  the  world.  The  people  con- 
fidently expected  to  enter  at  once  upon  a  period  of  great 
material  prosperity.  Relieved  of  the  restrictions  imposed 
upon  their  industry  and  commerce  by  the  British  Parlia- 


THE  REVOLUTION  163 

ment  they  felt  that  they  had  greater  opportunities  for 
economic  development  than  they  had  ever  enjoyed  as  col- 
onists. They  were  soon  to  find  out  however  that  it  takes 
more  than  mere  political  freedom  to  create  economic  pros- 
perity; that  liberty  is  of  little  advantage  without  industry, 
thrift  and  order. 

Questions  and  Topics 

1.  Why  does  the  Federal  Government  now  prohibit 
lotteries? 

2.  What  methods  are  now  used  by  the  United  States  to 
raise  money  in  time  of  war? 

3.  Is  it  always  true  that  war  stimulates  home  industries? 
Give  reasons  for  your  answer. 

4.  Why  does  a  war  seem  to  bring  an  aftermath  of  ex- 
travagance ? 

5.  Compare  the  two  modes  of  westward  emigration — by 
land  and  by  water. 

6.  Write  a  short  essay  describing  the  life  of  the  fron- 
tiersman, 

7.  Compare  the  life  of  the  uncivilized  with  the  civilized 
Indian.  Did  the  settlers  of  America  do  him  a  service  or 
an  injustice? 

8.  Write  a  short  biography  of  Daniel  Boone. 


CHAPTER  IX 
AN  ECONOMIC  CRISIS;  THE  CONSTITUTION 

The  Resumption  of  Peaceful  Trade.  Hostilities  between 
Great  Britain  and  the  United  States  were  declared  at  an  end 
early  in  1783,  Washington  reading  the  official  proclamation 
at  the  head  of  his  army  on  the  eighth  anniversary  of  the 
battle  of  Lexington.  Arrangements  were  soon  made  for 
the  resumption  of  peaceful  trade.  The  blockading  squad- 
rons of  the  British  navy  were  withdrawn  from  the  Ameri- 
can coast,  and  it  was  possible  once  more  for  merchant  ves- 
sels to  enter  and  leave  the  ports  of  the  United  States  with- 
out risk  of  capture. 

The  war  had  placed  many  restrictions  upon  the  ordinary 
operations  of  trade  and  once  these  restrictions  were  gone 
there  was  a  rapid  expansion  of  commercial  activity  in  the 
United  States.  In  fact,  the  reaction  following  the  long 
period  of  war  and  the  general  expectation  that  great  pros- 
perity would  come  with  peace  and  independence  aroused  a 
spirit  of  speculation  among  the  people  which  soon  had  dis- 
astrous results.  A  significant  feature  of  the  increased  com- 
mercial activity  was  a  great  increase  in  import  trade  and 
particularly  an  increase  of  imports  from  Great  Britain. 
Before  the  Revolution,  America  had  long  been  one  of  the 
most  profitable  markets  of  British  merchants.  They  were 
glad  when  this  market  was  again  opened  freely  to  their 
merchandise,  and  the  people  of  the  United  States  were 
glad  to  have  the  opportunity  once  more  of  freely  buying 
British  products.  A  few  Americans  and  Frenchmen  be- 
lieved that  after  the  war  ended  France  would  get  a  large 

164 


CRISIS  AND  CONSTITUTION  165 

part  of  American  trade.  It  soon  became  evident,  how- 
ever, that  it  was  not  alone  the  British  commercial  policy 
which  had  caused  the  American  colonists  to  buy  their  im- 
ported goods  from  England.  The  Americans  were  grate- 
ful to  the  French  for  their  generous  help  during  the  Revo- 
lution, but,  as  it  has  often  been  shown,  sentiment  has  little 
to  do  with  commerce.  A  nation  buys  where  it  can  get  the 
most  desirable  goods  at  the  best  prices  and  on  the  most 
favorable  terms.  English  manufacturers  produced  what 
the  people  of  the  United  States  wanted  to  buy;  English 
merchants  were  familiar  with  the  needs  of  American  con- 
sumers, and  they  were  willing  to  give  the  long-term  credits 
which  a  country  must  have  if  its  chief  industry  is  agri- 
culture. The  Americans  did  not  like  French  manufac- 
tures as  well  as  they  liked  English,  and  the  French  mer- 
chants did  not  understand  the  commercial  needs  of  America. 
Another  condition  which  made  it  more  convenient  for  the 
United  States  to  trade  with  England  was  the  fact  that  the 
two  countries  used  the  same  language.  The  records  of  the 
British  customs  show  that  in  1784  the  imports  of  the 
United  States  from  Great  Britain  amounted  in  value  to 
£3,670,467,  and  in  1785  to  £2.308,023.  The  value  of 
American  imports  from  other  countries  during  these  years 
is  not  known,  but  it  is  certain  that  the  purchases  from  no 
other  country  were  as  large  as  the  purchases  from  Great 
Britain. 

Unfortunately  for  the  United  States  the  exports  of  the 
nation,  for  the  time  being,  fell  far  short  of  imports  in 
value.  There  were  two  reasons  for  this;  first,  the  lack 
of  exportable  commodities,  and  second,  the  unfavorable 
commercial  regulations  of  European  countries.  The  chief 
exports  of  America  had  long  been  tobacco,  wheat  and  flour, 
fish  and  rice.  The  war  had  destroyed  the  fisheries,  and 
though  the  fishermen  began  operations  as  soon  as  hostilities 
ended  it  was  impossible  to  restore  the   fishing   industry 


166  CRISIS  AND  CONSTITUTION 

in  a  single  year.  During  the  last  three  years  of  the  war, 
the  production  of  rice  in  Georgia  and  South  Carolina  had 
been  crippled  by  military  operations  and  by  the  confisca- 
tion of  several  thousand  slaves  by  British  military  authori- 
ties. Rice  culture  could  not  be  restored  to  its  former 
state  until  the  supply  of  slaves  was  replenished.  Tobacco, 
wheat  and  flour  were  the  only  important  exports  the  pro- 
duction of  which  was  near  normal.  But  even  if  there  had 
been  an  abundant  production  of  all  the  important  export 
commodities  it  would  have  been  impossible  to  market  them. 

The  people  of  the  United  States  suddenly  discovered  that 
their  position  as  an  independent  nation  was  not  without 
its  disadvantages.  Though  Great  Britain  had  restricted 
the  economic  development  of  her  colonies  in  certain  direc- 
tions, she  had  encouraged  it  in  others.  Moreover,  she  had 
used  her  great  power  to  defend  and  protect  the  colonies 
and  to  secure  for  them  commercial  privileges  in  many 
markets  of  the  world.  The  Americans  now  had  to  shift 
for  themselves.  Great  Britain  was  no  longer  a  power- 
ful protector  but  a  keen  and  even  an  unfriendly  rival. 
France  and  Spain,  who  had  helped  the  United  States 
achieve  independence,  also  showed  a  changed  attitude  when 
the  war  was  over.  They  had  been  willing  enough  to  in- 
jure their  ancient  enemy  by  giving  encouragement  and  as- 
sistance to  her  rebellious  colonies,  but  once  the  discom- 
fiture of  England  was  accomplished,  they  had  no  desire 
to  promote  the  development  of  a  new  commercial  rival. 

The  law  enacted  by  the  English  Parliament  in  1660  pro- 
vided that  all  products  of  Asia,  Africa  or  America  im- 
ported into  England  should  be  carried  directly  from  the 
place  of  production  in  English  ships.  It  also  provided 
that  all  goods  exported  from  or  imported  into  the  Eng- 
lish colonies  in  America  should  be  carried  in  English  ships. 
Since  the  United  States  was  now  an  independent  nation 
this  law  operated  against  American  vessels.     It  not  only 


CRISIS  AND  CONSTITUTION  167 

forbade  vessels  of  the  United  States  to  engage  in  trade 
with  the  British  West  Indies,  but  strictly  interpreted,  it 
forbade  them  to  carry  products  of  this  country  even  to 
Great  Britain.  Under  this  law  American  shipping  in- 
terests were  excluded  from  what  in  colonial  days  had  been 
the  most  profitable  branches  of  their  trade. 

Early  in  1783  Parliament  enacted  a  law  authorizing  the 
king  temporarily  to  regulate  British  commerce  with  the 
United  States.  Acting  through  his  Privy  Council,  the 
king  issued  "orders  in  council"  with  respect  to  the  privi- 
leges which  the  United  States  might  have  in  commerce 
with  the  British  empire.  The  first  important  order,  pub- 
lished July  2,  1783,  was  drawn  up  by  a  member  of  the 
council,  William  Knox,  who  wrote  that  he  carried  it 
through  against  the  opposition  of  Edmund  Burke  and 
other  friends  of  America,  "and  thereby  saved  the  naviga- 
tion and  maritime  importance  of  this  country  and 
strangled  in  birth  that  of  the  United  States."  The  order 
was  typical  of  the  selfish  mercantile  spirit  of  the  times. 
It  placed  the  vessels  of  the  United  States  on  virtually  an 
equal  footing  with  vessels  of  Great  Britain  in  the  direct 
trade  between  the  two  countries,  but  it  did  not  permit 
vessels  of  the  United  States  to  trade  with  the  British  West 
Indies.  Moreover,  it  permitted  British  vessels  to  carry 
only  a  limited  number  of  the  products  of  the  United  States 
to  the  British  colonies  in  the  West  Indies,  and  among  the 
commodities  named  fish  and  salted  meats  did  not  appear. 
The  purpose  of  excluding  these  articles  was  to  stimulate 
and  aid  their  production  and  export  by  the  people  of 
Canada.  The  order  in  council  was  continued  from  year 
to  year  until  1788  when  its  provisions  were  enacted  into 
law. 

Throughout  the  colonial  period  the  West  Indian  trade 
had  been  the  leading  business  of  American  merchants  and 
shipowners,  and  the  English  islands  had  been  one  of  their 


168  CRISIS  AND  CONSTITUTION 

leading  markets.  At  the  close  of  the  war,  they  were  con- 
fidently expecting  a  further  development  of  their  com- 
merce with  these  islands.  The  action  of  the  British  gov- 
ernment was  a  severe  blow.  But  this  was  not  all.  Be- 
fore the  end  of  1783,  Spain  and  France  also  closed  their 
West  Indian  ports  to  American  ships.  The  entire  West 
Indian  trade  of  American  shipowners  was  virtually  de- 
stroyed, and  since  Spain  and  France  had  few  vessels  to 
carry  traffic  from  the  United  States  to  their  colonies,  one 
of  the  most  important  outlets  for  American  exports  was 
closed.  The  small  islands  belonging  to  the  Netherlands 
and  Denmark  were  the  only  places  in  the  West  Indies 
where  the  ships  and  products  of  the  United  States  were 
freely  received. 

Before  the  war,  markets  of  Southern  Europe  had  offered 
a  good  commercial  opportunity  to  colonial  shipowners. 
When  they  endeavored  to  develop  this  trade  again  at  the 
close  of  the  war  their  vessels  were  captured  by  the  pirates 
of  the  Barbary  States  in  northern  Africa.  Before  the 
Revolution  colonial  vessels  had  been  protected  from  pirates 
by  the  powerful  British  empire;  after  1783  this  protec- 
tion was  lacking.  It  was  a  matter  of  satisfaction  to  the 
great  maritime  nations  of  Europe  that  these  African 
pirates  could  prevent  the  weaker  nations  of  the  world  from 
extending  their  carrying  trade.  Lord  John  Sheffield,  an 
ardent  defender  of  Great  Britain's  commercial  policy, 
wrote,  "It  is  not  probable  the  American  States  will  have 
a  very  free  trade  in  the  Mediterranean.  .  .  .  That  the 
Barbary  States  are  advantageous  to  the  maritime  powers 
is  certain,  .  .  .  The  Americans  cannot  protect  them- 
selves. ..." 

Economic  Depression.  A  nation  can  pay  for  its  imports 
only  by  exporting  goods  or  specie.  Since  the  merchants 
of  the  United  States  could  export  only  a  limited  amount 
of  goods  they  were  forced  to  send  abroad  nearly  all  the 


CRISIS  AND  CONSTITUTION  169 

specie  of  the  country.     Even  after  this  was  done  they  were 
still   heavily   in   debt   to    foreign   merchants.     Meanwhile 
they  had  sold  their  imported  goods  on  credit  to  the  farm- 
ers, planters,  workmen  and  other  classes  of  the  popula- 
tion.    These   purchasers   had   expected   to   pay   with   the 
money  which   they   received  for   their   products.     Unfor- 
tunately, they  could  not  do  this.     The  exportation  of  specie 
caused  prices  to  fall  very  rapidly  and  even  if  the  farm- 
ers succeeded   in   selling   their   products,   they   could  not 
get  enough  money  to  enable  them  to   meet   their  debts. 
The  large  imports  of  British  manufactured  goods  quickly 
caused  the  ruin  of  the  struggling  manufacturing  industries 
in  the  United   States,  the  workmen  were  thrown  out  of 
employment,    the    employers   suffered   heavy    losses.     The 
consequence     of     the    purchase     of     excessive     quantities 
of    foreign    goods    was    that    nearly    everybody    in    the 
United    States    became    heavily    involved    in    debt,    and 
there    was    no    means    of    making    payment.     A    number 
of   State   legislatures  enacted   laws  suspending  the   right 
of    creditors    to    collect     debts,    or    requiring    creditors 
to    accept    certain    commodities    at   prices   named    in    the 
laws.     All  the  States  but  four,  New  Hampshire,  Massa- 
chusetts,   Maryland    and    Virginia,    tried    to    help    mat- 
ters by  the  issue  of  paper  money,  but  as  usual  this  only 
made  the  situation  worse,  giving  debtors  a  way  of  shift- 
ing their  losses  to  others  and  thereby  creating  discontent. 
The  use  of  ''country  pay"  or  commodity  currency  again 
became  common.     In  1785  and  1786  there  was  great  dis- 
tress throughout  the  country,  and  serious  trouble  in  nearly 
all  the  States.     In  Massachusetts,  the  merchants  brought 
suit  for  the  collection  of  the  money  owed  to  them,  and 
the    courts    ordered    the    sale    of    the    debtors'    property. 
Since  property  of  all  kinds  would  bring  only  a  small  frac- 
tion of  its  price  in  ordinary  times,  there  was  a  great  out- 
cry on  the  part  of  the  debtors  against  the  courts  and  the 


170  CRISIS  AND  CONSTITUTION 

merchants.  An  organized  body  of  malcontents,  led  by 
Captain  Daniel  Shays,  took  up  arms  to  resist  the  author- 
ities, and  for  a  time  it  seemed  that  the  government  of 
Massachusetts  would  be  overthrown.  An  armed  insur- 
rection in  New  Hampshire  was  narrowly  averted,  and  in 
other  parts  of  the  country  there  were  serious  disturbances. 
The  conditions  of  unrest  tended  to  discourage  industry 
and  thus  made  matters  worse. 

One  effect  of  the  hard  times  was  a  greatly  increased 
emigration  to  the  West.  For  many  years  the  great  area 
of  unoccupied  land  across  the  Appalachian  highland  was 
to  be  a  haven  of  refuge  for  the  inhabitants  of  the  Eastern 
States  in  times  of  commercial  and  industrial  depression. 
For  several  years  after  1784  hundreds  of  men,  overcome 
by  their  burden  of  debt,  gave  up  their  possessions  and  went 
to  Kentucky,  Tennessee,  and  western  Pennsylvania  to  start 
life  anew.  On  the  fertile  lands  of  the  great  interior  valley 
they  could  at  least  make  a  living  for  their  families. 

At  this  time,  however,  the  people  of  the  West  were  hav- 
ing trouble,  and  they  too  became  infected  with  the  gen- 
eral spirit  of  discontent.  They  were  beginning  to  produce 
a  large  surplus  of  grain,  tobacco  and  live  stock,  which 
they  could  not  consume  themselves  but  which,  if  they  could 
but  sell  it,  would  enable  them  to  buy  many  articles  which 
they  could  not  make.  It  was  impossible  for  them  to  take 
their  heavy  agricultural  products  across  the  mountains 
to  eastern  markets,  but  it  was  comparatively  easy  to  send 
them  in  flatboats  down  the  Mississippi  River  to  the  Spanish 
port  of  New  Orleans.  The  Western  farmers  carried  on  a 
considerable  trade  with  the  Spanish  city  during  the  clos- 
ing years  of  the  Revolution,  but  to  their  surprise  and  dis- 
may, when  the  war  was  over,  the  Spanish  authorities  closed 
the  river  to  them  and  proceeded  to  confiscate  the  loaded 
flatboats  which  were  floated  down  the  stream  into  Spanish 
territory. 


CRISIS  AND  CONSTITUTION  171 

The  Western  people  were  highly  incensed  at  the  action 
of  the  Spanish  government,  and  they  asked  the  Congress 
to  require  Spain  to  open  the  river  to  the  flatboat  trade. 
The  Congress  apparently  had  no  desire  to  help.  The  mer- 
chants and  shipowners  of  the  New  England  and  Middle 
Atlantic  States  wanted  Spain  to  open  her  West  Indian 
ports  to  American  ships,  and  agents  of  the  Congress  for 
a  time  tried  to  negotiate  a  treaty  in  which  the  United 
States  was  to  consent  to  the  closing  of  the  Mississippi  for 
a  period  of  twenty-five  years  in  return  for  commercial 
privileges  in  the  Spanish  West  Indies.  When  the  people 
of  Kentucky,  Tennessee,  and  Western  Pennsylvania  heard 
of  these  negotiations  they  became  greatly  excited.  Some 
talked  of  withdrawal  from  the  United  States  and  union 
with  the  Spanish  province  of  Louisiana;  others  wanted  to 
seize  New  Orleans  by  force  and  compel  the  Span'sh 
authorities  to  open  the  river.  The  people  of  the  region 
now  composing  the  eastern  part  of  Tennessee  declared 
their  independence  of  North  Carolina,  organized  the  state 
of  "Franklin,"  and  for  two  years  (1785-86)  had  a  gov- 
ernment of  their  own.  If  Spain  had  offered  any  induce- 
ments to  the  Western  settlers,  they  might  have  broken 
entirely  away  from  the  United  States ;  but  instead  of  en- 
couraging them,  Spain  repelled  them  by  her  policy  of  sel- 
fishness. The  Spanish  authorities  thought  that  Louisiana 
could  be  held  more  easily  if  American  settlers  were  kept 
out  of  the  region  between  the  Appalachian  highland  and 
the  ^lississippi.  Washington  was  greatly  disturbed  over 
conditions  in  the  West.  Late  in  ]783  he  wrote  to  a  friend, 
saying,  "The  Western  states  hang  upon  a  pivot.  The 
touch  of  a  feather  would  turn  them  either  way."  He 
believed  that  the  difficulty  could  best  be  solved  by  provid- 
ing adequate  means  of  transportation  between  the  eastern 
and  western  districts.  In  1785  he  became  president  of  a 
company    organized    to    improve    the    navigation    of    the 


172  CRISIS  AND  CONSTITUTION 

Potomac  River,  and,  if  possible,  to  construct  a  navigable 
waterway  extending  to  the  Ohio  River. 

Weakness  of  the  Government.  A  serious  difficulty  of 
the  people  in  the  midst  of  their  distress  was  the  utter  in- 
ability of  their  government  to  do  anything  to  relieve  the 
situation.  Though  it  is  probable  that  even  the  strongest 
government  could  have  done  little  to  save  the  people  from 
the  results  of  their  speculations,  the  government  which 
they  had  could  not  even  attempt  to  take  action.  The 
Articles  of  Confederation  provided  for  a  Congress,  but 
the  only  important  powers  of  the  Congress  were  to  make 
war  and  peace,  negotiate  treaties,  borrow  money  and 
operate  the  Post-office.  Each  State  had  one  vote  in  the 
Congress  and  in  all  matters  except  postal  affairs  the  vote 
of  nine  States  was  required  for  affirmative  action.  A 
State  could  send  from  two  to  seven  delegates  to  the  Con- 
gress and  could  recall  any  or  all  of  them  at  will.  Amend- 
ments to  the  Articles  of  Confederation  had  to  be  enacted 
by  the  Congress  and  then  ratified  by  the  legislatures  of 
all  the  States. 

The  Congress  could  pass  laws  but  their  enforcement  was 
left  to  the  States;  it  could  not  regulate  commerce  and  it 
did  not  have  the  power  of  taxation.  By  a  vote  of  nine 
States  it  could  determine  the  expenses  of  the  govern- 
ment, and  make  a  requisition  on  the  States  for  the  neces- 
sary sums  of  money,  each  State  being  supposed  to  con- 
tribute in  proportion  to  the  value  of  the  real  estate  within 
its  boundaries.  At  no  time  during  the  period  from  1781 
to  1789,  while  the  Articles  were  in  effect,  did  the  States 
contribute  all  the  money  which  the  Congress  requested,  and 
there  was  no  way  to  make  them  pay.  The  Congress  could 
not  get  sufficient  money  to  meet  expenses  and  pay  the  in- 
terest on  the  national  debt.  In  June,  1783,  several  hun- 
dred mutineers  from  the  army  surrounded  the  building 
in  which  the  Congress  met  in  Philadelphia,  and  demanded 


CRISIS  AND  CONSTITUTION  173 

their  pay,  causing  the  Congress  to  abandon  Philadelphia 
and  hold  its  meetings  in  Princeton  and  in  Trenton,  and 
later  in  New  York.  Had  some  Dutch  bankers  not  come  to 
the  aid  of  the  government  with  loans  of  $1,600,000,  the 
Congress  would  have  defaulted  the  interest  on  the  debt, 
and  the  country  would  have  become  bankrupt. 

Since  the   Congress  could  not  regulate  commerce  and 
could  not  enforce  the  laws  which  it  passed,  it  could  not 
secure   desirable   commercial   privileges  from   foreign   na- 
tions.    It  negotiated  commercial  treaties  with  the  Nether- 
lands,  Sweden,  and  Prussia  between  1782  and  1785  but 
these  treaties,  and  the  one  negotiated  with  France  in  1778 
at  the  same  time  the  military  alliance  with  that  country 
was  formed,  gave  no  trading  privileges  except  in  the  home 
ports  of  the  countries  with  which  the  treaties  were  made. 
What    the    United    States    needed    most    was    commercial 
privileges  in  the  West  Indies.     When  American  commis- 
sioners tried  to   secure   a   commercial   treaty  with   Great 
Britain  the  Duke  of  Dorset  inquired  to  what  extent  the 
commissioners  were  "authorized  to  enter  into  any  engage- 
ments with  Great  Britain,   which  it  may  not  be  in  the 
power  of  any  one  of  the  States  to  render  totally  fruit- 
less  and   ineffectual."     In   open   violation   of   the   treaty 
of  peace   of   1783   a   number   of   States   enacted   laws   to 
prevent  British  creditors  from  collecting  the  debts  which 
Americans  had  contracted  before  the  Revolution.     In  an- 
swer to  this  dishonorable  conduct  the  British  Government 
declared  that  it  would  not  surrender  the  military  posts 
which   it   held   on   the   northern    frontier   of   the   United 
States  until  the  debts  were  settled. 

Quarrels  Among  the  States.  The  economic  depression 
tended  to  strengthen  the  spirit  of  distrust  and  suspicion 
among  the  States  and  they  endeavored  to  take  unfair  ad- 
vantage of  one  another  in  a  number  of  ways.  When 
New  York  tried  to  retaliate  against  Great  Britain  by  plac- 


174  CRISIS  AND  CONSTITUTION 

ing  high  duties  on  British  ships  and  goods,  Connecticut 
and  New  Jersey  endeavored  to  capture  the  British  trade 
by  granting  special  privileges.  New  York  then  imposed 
duties  on  all  goods,  both  foreign  and  domestic,  coming 
from  the  two  rival  States,  and  New  Jersey  responded 
by  placing  a  tax  of  thirty  pounds  a  month  upon  a  few 
acres  of  land  which  the  State  of  New  York  had  bought 
at  Sandy  Hook  for  the  purpose  of  erecting  a  lighthouse. 
The  States  which  had  no  good  ports  were  taxed  by  the 
neighboring  States  through  whose  ports  their  commerce 
was  conducted.  On  several  occasions  there  was  actual 
danger  of  civil  war  because  of  the  jealousies  and  con- 
flicting interests  of  neighboring  States. 

Unsuccessful  Efforts  at  Improvement.  The  financial 
distress  of  the  Government  prompted  the  Congress  early 
in  1781  to  ask  the  States  for  power  to  levy  duties  on  im- 
ports for  a  limited  period  of  time  in  order  to  obtain  funds 
to  meet  the  expenses  of  the  war  and  pay  the  interest  on 
the  debt.  All  the  States  consented  except  Rhode  Island. 
"It  is  certainly  pernicious  to  leave  any  government  in  a 
situation  of  responsibility  disproportioned  to  its  power," 
said  the  committee  of  the  Congress  which  endeavored, 
without  success,  to  induce  the  Rhode  Island  legislature  to 
reconsider  its  refusal.  In  April,  1783,  the  Congress  again 
appealed  to  the  States  for  power  to  raise  revenue,  and 
again  the  appeal  was  without  satisfactory  result. 

By  1784  the  Congress  was  disturbed  not  only  by  the 
financial  condition  of  the  government,  but  also  by  the 
adverse  commercial  regulations  of  Spain,  France,  and 
Great  Britain.  A  committee  submitted  a  report  on  April 
30,  which  read  in  part  as  follows: 

"The  trust  reposed  in  Congress  renders  it  their  duty 
to  be  attentive  to  the  conduct  of  foreign  nations,  and 
to  prevent  or  restrain,  as  far  as  may  be,  all  such  pro- 
ceedings as  might  prove  injurious  to  the  United  States. 


CRISIS  AND  CONSTITUTION  175 

The  situation  of  commerce  at  this  time  claims  the  at- 
tention of  the  several  States;  and  few  objects  of  greater 
importance  can  present  themselves  to  their  notice.  The 
fortune  of  every  citizen  is  interested  in  the  success 
thereof,  for  it  is  the  constant  source  of  wealth  and  in- 
centive to  industry ;  and  the  value  of  our  produce  and 
our  land  must  ever  rise  or  fall  in  proportion  to  the 
prosperous  or  adverse  state  of  trade. 

"Already  has  Great  Britain  adopted  regulations  de- 
structive of  our  commerce  with  her  West  India  Islands. 
There  was  reason  to  expect  that  measures  so  unequal 
and  so  little  calculated  to  promote  mercantile  inter- 
course, would  not  be  persevered  in  by  an  enlightened 
nation.  .  .  . 

"Unless  the  United  States  in  Congress  assembled  shall 
be  vested  with  powers  competent  to  the  protection  of 
commerce,  they  can  never  command  reciprocal  advan- 
tages in  trade;  and,  without  these,  our  foreign  com- 
merce must  decline,  and  eventually  be  annihilated. 
Hence  it  is  necessary  that  the  States  should  be  explicit, 
and  fix  some  effectual  mode  by  which  foreign  commerce 
not  founded  on  principles  of  equality  may  be  re- 
strained. ' ' 

It  was  suggested  by  the  committee  that  the  Congress 
be  given  authority,  for  a  term  of  fifteen  years,  to  regulate 
commerce  with  foreign  nations,  it  being  hoped  that  by  a 
process  of  retaliation  Great  Britain  could  be  induced  to 
open  her  West  Indian  ports.  Three  States  refused  abso- 
lutely to  entertain  this  proposal.  On  July  13,  1785,  the 
Congress  submitted  to  the  States  another  amendment  of 
the  Articles  of  Confederation,  authorizing  the  Congress  to 
exercise  a  limited  control  over  foreign  and  domestic  com- 
merce, and  again  the  same  disheartening  response  was 
forthcoming.  It  was  clear  that  the  Articles  of  Confedera- 
tion could  never  be  amended  by  the  prescribed  method. 
The  union  of  States  seemed  to  be  breaking  up,  when  help 
suddenly  came  in  an  unexpected  manner. 

The  Annapolis  Commercial  Convention.     In  1785  dele- 


176  CRISIS  AND  CONSTITUTION 

gates  from  the  States  of  Virginia  and  Maryland  met  at 
Alexandria,  Virginia,  to  see  if  they  could  make  an  agree- 
ment concerning  the  navigation  of  the  Potomac  River  and 
Chesapeake  Bay,  over  which  both  States  claimed  certain 
rights.  Washington  invited  the  delegates  to  hold  their 
deliberations  at  his  home,  Mount  Vernon.  After  they  had 
amicably  adjusted  the  matter  for  which  the  meeting  was 
held,  it  occurred  to  them  that  it  would  be  a  good  thing 
if  such  meetings  were  held  at  regular  intervals  to  discuss 
commercial  problems  of  common  interest  to  the  two  States, 
and  the  delegates  returned  home  pledged  to  ask  their  re- 
spective legislatures  to  make  provision  for  future  meet- 
ings. The  Maryland  legislature  not  only  consented  to  the 
proposal  but  suggested  that  delegates  from  Pennsylvania 
and  Delaware  be  invited  to  join  the  conferences.  In  Vir- 
ginia the  legislature  went  a  step  farther.  James  Madison 
introduced  a  resolution  in  January,  1786,  providing  that 
all  the  States  be  asked  to  appoint  commissioners  to  meet 
"at  a  time  and  place  to  be  agreed  upon,  to  take  into  con- 
sideration the  trade  of  the  United  States,  to  examine  the 
relative  situations  and  trade  of  the  said  States;  to  consider 
how  far  an  uniform  system  in  their  commercial  regula- 
tions may  be  necessary  to  their  common  interest  and  per- 
manent harmony.  ..." 

Several  States  accepted  the  suggestion  contained  in 
Madison's  resolution,  and  in  September,  1786,  a  com- 
mercial convention  assembled  at  Annapolis.  Georgia  and 
South  Carolina  sent  no  delegates  and  none  came  from  New 
England.  The  legislatures  of  Massachusetts  and  Rhode 
Island  appointed  commissioners  but  they  did  not  reach 
Annapolis  before  the  meeting  ended.  The  convention  did 
not  last  long  and  its  only  action  of  importance  was  to 
submit  a  report,  drawn  up  by  Alexander  Hamilton  of 
New  York,  recommending  that  a  meeting  of  delegates 
from  all  the  States  be  held  in  Philadelphia  in  1787  "to 


CRISIS  AND  CONSTITUTION 


177 


take  into  consideration  the  situation  of  the  United  States, 
to  devise  such  further  provisions  as  shall  appear  to  them 
necessary  to  render  the  Constitution  of  the  Federal  Gov- 
ernment adequate  to  the  exigencies  of  the  Union.  .  .  ." 
Thus  out  of  the  commercial  difficulties  and  economic  needs 


Independence  Hall,  Philadelphia 

of  the  country  came  the  call  for  a  new  and  better  form 
of  government.  On  February  21,  1787,  the  Congress  re- 
solved that  a  convention  be  held  in  Philadelphia  in  IMay 
for  the  purpose  of  revising  the  Articles  of  Confederation. 


178  CRISIS  AND  CONSTITUTION 

All  the  States  except  Rhode  Island  sent  delegates  to  the 
convention  and  it  assembled  at  the  appointed  time. 

The  Constitution.  The  constitutional  convention  sat 
through  the  hot  summer  months,  completing  its  work  in 
September.  Its  primary  purpose  was  to  draw  up  a  new 
instrument  of  government,  providing  for  an  organiza- 
tion with  power  to  regulate  the  commerce  and  maintain  the 
credit  of  the  nation,  and  to  manage  external  relations. 
Defining  the  powers  of  the  new  government  and  creating 
the  machinery  to  carry  these  powers  into  effect  were  mat- 
ters of  no  little  difficulty  because  of  the  rivalries  and  con- 
flicting interests  of  the  States.  The  small  States  were 
afraid  that  the  large  States  would  be  given  too  much 
power;  the  large  States  did  not  want  to  be  dictated  to  by 
States  inferior  in  wealth  and  population.  The  commer- 
cial States  of  the  North  wanted  Congress  to  have  power 
to  protect  shipping  and  trading  interests;  the  agricultural 
States  of  the  South  were  opposed  to  giving  Congress  such 
power  because  they  feared  the  taxation  of  exports  and 
high  freight  charges.  The  Southern  States  did  not  want 
Congress  to  have  the  power  to  prohibit  the  slave  trade 
or  power  to  tax  it  out  of  existence.  They  denied  the 
negroes  the  right  to  vote  but  they  wanted  them  counted 
in  the  apportionment  of  representatives.  With  such  wide 
divergence  of  interests,  agreement  could  be  reached  only 
by  compromise.  In  presenting  the  new  Constitution  to 
the  Congress,  Washington  wrote,  "Individuals  entering 
into  society  must  give  up  a  share  of  liberty  to  preserve 
the  rest.  ...  It  is  at  all  times  difficult  to  draw  with  preci- 
sion the  line  between  those  rights  which  must  be  sur- 
rendered and  those  which  may  be  reserved ;  and  on  the 
present  occasion  this  difficulty  was  increased  by  a  differ- 
ence among  the  several  States  as  to  their  situation,  ex- 
tent, habits  and  particular  interests." 

From  the  standpoint  of  economic  history  the  most  im- 


CRISIS  AND  CONSTITUTION  179 

portant  features  of  the  Constitution  were  those  defining 
the  powers  of  the  National  and  of  the  State  Governments 
with  respect  to  commerce,  industry  and  finance.  Congress 
was  given  power  ''to  lay  and  collect  taxes,  duties,  im- 
posts and  excises,  to  pay  the  debts  and  provide  for  the 
common  defense  and  general  welfare  of  the  United 
States";  "to  borrow  money  on  the  credit  of  the  United 
States";  "to  regulate  commerce  with  foreign  nations  and 
among  the  several  States,  and  with  the  Indian  tribes"; 
"to  coin  money,  regulate  the  value  thereof,  and  of  foreign 
coins,  and  fix  the  standard  of  weights  and  measures"; 
"to  establish  post-offices  and  post-roads";  to  maintain 
copyrights  and  patents;  to  provide  for  the  punishment 
of  counterfeiters;  to  make  uniform  bankruptcy  laws. 
On  the  other  hand,  Congress  was  forbidden  to  prohibit 
the  slave  trade  before  1808  or  to  lay  a  tax  on  imported 
slaves  exceeding  ten  dollars  a  head ;  to  levy  duties  on  ex- 
ports ;  to  give  preference  to  the  ports  of  one  State  over 
those  of  another;  to  lay  direct  taxes  unless  in  proportion 
to  the  population.  The  power  to  negotiate  treaties  was 
vested  exclusively  in  the  President  and  the  Senate. 

The  States  were  forbidden  to  coin  money ;  to  emit  bills 
of  credit ;  to  make  anything  but  gold  and  silver  coin  a 
legal  tender;  to  pass  any  law  impairing  the  obligation  of 
contracts;  to  laj'  tonnage  duties  or  duties  on  exports  and 
imports  without  the  consent  of  Congress ;  to  enter  into  any 
compact  or  agreement  with  another  State  or  with  a  foreign 
power  without  the  consent  of  Congress. 

The  convention  voted  that  special  conventions  should  be 
called  in  the  several  States  to  deliberate  upon  the  ques- 
tion of  ratifying  the  new  Constitution,  and  in  the  final 
article  of  the  document  it  was  most  wisely  provided  that 
ratification  by  nine  States  should  be  sufficient  to  establish 
the  Constitution  for  those  nine. 

The  Congress  of  the  Confederation  quickly  voted  that 


180  CRISIS  AND  CONSTITUTION 

the  Constitution  should  be  submitted  to  the  States,  and 
the  State  legislatures  called  conventions  to  take  up  the 
question  of  ratification.  In  many  conventions  there  were 
long  and  bitter  conflicts,  the  new  Constitution  being  op- 
posed by  many  men  of  unquestioned  ability  and  patriotism. 
In  several  States  earnest  efforts  were  made  to  accompany 
the  resolutions  of  ratification  with  amendments  and  reser- 
vations, but  these  efforts  were  finally  unsuccessful.  New 
Hampshire  was  the  ninth  state  to  ratify,  in  June,  1788, 
Virginia  and  New  York  being  respectively  tenth  and 
eleventh.  North  Carolina  did  not  ratify  until  November, 
1789,  and  Rhode  Island  held  back  until  May,  1790.  On 
September  13,  1788,  the  Congress  of  the  Confederation  re- 
solved that  the  new  Constitution  had  been  ratified  and 
directed  that  elections  of  new  federal  officers  should  take 
place,  fixing  the  first  Wednesday  in  the  following  March 
as  the  date  when  the  new  Government  should  go  into  opera- 
tion. 

The  Revival  of  Prosperity.  Many  months  before  the 
Constitution  was  ratified  and  the  new  Government  estab- 
lished, the  industrial  and  commercial  condition  of  the 
United  States  took  a  distinct  turn  for  the  better.  The 
crisis  of  1785-86  was  of  a  kind  from  which  a  nation  can 
easily  recover.  There  had  been  no  great  decline  in  produc- 
tion nor  great  destruction  of  wealth.  The  depression  was 
due  primarily  to  the  extravagant  purchase  of  foreign 
goods  on  credit  by  American  merchants,  who  passed  the 
goods  on  to  their  customers,  also  on  credit.  The  exporta- 
iton  of  specie  having  caused  a  sharp  drop  in  prices,  when 
creditors  pressed  for  what  was  due,  debtors  were  unable 
to  pay.  There  were  no  banks  or  other  credit  agencies 
to  which  debtors  could  go  for  temporary  relief.  They 
had  to  suffer  because  they  had  formed  an  incorrect  judg- 
ment of  their  capacity  to  pay.  The  only  methods  by 
which  business  could  be  restored  to  a  normal  state  was 


CRISIS  AND  CONSTITUTION  181 

by  decreasing  purchases  of  foreign  goods  and  by  increas- 
ing, if  possible,  the  production  and  export  of  domestic 
goods.  In  this  way  debts  could  be  paid  off,  specie  would 
come  into  circulation,  prices  would  rise,  and  business  be- 
come normal. 

The  people  were  compelled  to  reduce  their  purchases  of 
foreign  goods  because  they  had  almost  exhausted  their 
credit.  The  imports  from  England  in  1786  amounted  in 
value  to  £1,603,465,  less  than  one-half  the  amount  in 
1784.  In  1787,  they  were  slightly  in  excess  of  £2,000,000 
in  value,  and  in  the  following  year  somewhat  less  than  that 
amount.  The  imports  from  other  countries  doubtless  de- 
clined in  similar  fashion.  On  the  other  hand,  the  people 
were  able  to  increase  their  exports.  Their  sales  to  Great 
Britain  advanced  in  value  from  £749,345  in  1784  to 
£1,023,789  in  1788,  and  their  exports  to  other  parts  of  the 
world  increased  even  more  rapidly.  They  sold  more  goods 
to  the  Netherlands,  Denmark  and  Prussia,  and  opened  up 
new  markets  in  Sweden  and  Russia.  In  1783,  a  New  York 
ship,  the  Empress  of  China,  sailed  for  Canton,  the  first 
vessel  of  the  United  States  to  go  to  China.  It  returned 
to  New  York  in  1785.  Merchants  of  Salem  and  Boston 
began  trading  with  the  Orient  during  this  period,  and  the 
American  flag  became  a  familiar  sight  in  the  seaports 
of  the  Far  East.  Out  of  forty-six  ships  lying  in  the 
harbor  of  Canton  on  one  occasion  in  1789,  eighteen  were 
American.  But  what  w^as  even  better  for  the  United 
States  than  these  new  branches  of  trade  was  the  almost 
complete  recovery  of  the   West   Indian  commerce. 

The  planters  of  the  West  Indies  did  not  approve  of  the 
exclusion  of  American  ships  and  food  products  from 
their  markets.  During  the  seven  years  following  1780 
several  terrific  hurricanes  swept  over  the  West  Indies 
causing  much  destruction  of  growing  crops  and  other 
property,  and  seriously  limiting  the  domestic   food  sup- 


182 


CRISIS  AND  CONSTITUTION 


ply.  Because  the  British  government  insisted  that  only 
British  ships  should  be  permitted  to  carry  food  and  other 
supplies  to  her  colonies,  fifteen  thousand  negro  slaves  in 
Jamaica  died  of  famine  or  of  diseases  caused  by  insuffi- 
cient food.  There  were  many  deaths  from  starvation  in 
the  other  islands.  The  protests  of  the  indignant  French 
planters  caused  the  government  of  France,  in  1784,  to 
open  a  number  of  French  West  Indian  ports  to  American 
ships  of  less  than  seventy  tons.  The  Spanish  and  English 
colonists  proceeded  to  connive  with  American  merchants 
and  shipowners  to  evade  the  regulations  of  Spain  and 
Great  Britain.  American  vessels  carried  cargoes  of  fish 
and  flour  to  St.  Eustatia  and  St.  Thomas,  whence  they 


Fitch's  Second  Steamboat 

were  smuggled  into  the  Spanish  and  British  islands.  The 
chief  method  of  evasion  was  for  the  American  vessels  to 
carry  forged  Spanish  and  British  registers.  In  British 
ports  the  vessels  were  British,  in  Spanish  ports  they  were 
Spanish.  British  naval  officers  endeavored  to  put  an  end 
to  these  fraudulent  practices  but  they  could  do  nothing 
without  the  cooperation  of  the  British  customs  officials 
in  the  islands.  Since  these  officials  were  willing  to  en- 
courage American  trade  and  even  supplied  most  of  the 
false  registers,  the  naval  force  received  little  help  from 
them.  By  1788  the  West  Indian  trade  of  the  United 
States  was  as  large  as  ever  and  the  New  England  fisheries, 
which  were  dependent  chiefly  upon  this  commerce,  were 


CRISIS  AND  CONSTITUTION 


183 


restored  to  their  former  prosperous  condition.  There  was 
even  a  substantial  revival  of  trade  to  the  ports  of  southern 
Europe,  protection  of  American  vessels  from  the  Barbary 
pirates  being  secured  by  papers  forged  to  show  British 
registry. 

The  restoration  of  the  export  trade  was  accompanied  by 
an  expansion  of  agriculture,  shipbuilding  and  manufac- 
tures. People  paid  off  their  debts  and  business  activity 
resumed  its  normal  condition.  New  manufacturing  in- 
dustries were  established  in  the  towns  of  Pennsylvania, 
New  York  and  New  England.  State  legislatures  and 
private  societies  sought  to   encourage  invention  and   in- 


Fitch's  Third  Steamboat 

dustry  by  offering  prizes  and  bounties  for  new  products 
and  new  methods  of  production.  A  number  of  people 
began  to  experiment  with  the  steam  engine,  which  for 
nearly  half  a  century  the  English  had  been  gradually  ap- 
plying to  many  industrial  operations  in  place  of  water 
power.  Between  1785  and  1790  John  Fitch  built  three 
steamboats  and  operated  them  on  the  Delaware  River  near 
Philadelphia,  though  none  of  them  was  near  enough  to 
mechanical  perfection  to  be  commercially  successful.  The 
return  of  prosperity  and  the  general  increase  of  wealth 
were  indicated  by  the  fact  that  in  1789  the  people  were 
able  to  buy  merchandise  of  England  of  a  value  of  £2,525,- 
298. 


184  CRISIS  AND  CONSTITUTION 

Western  Expansion.  Notwithstanding  the  stubborn  at- 
titude of  Spain  with  regard  to  the  navigation  of  the  Mis- 
sissippi, the  settlement  of  the  West  continued.  Not  only 
did  the  population  of  Tennessee,  Kentucky  and  Western 
Pennsylvania  increase  steadily,  but  emigrants  began  to 
enter  the  lands  in  the  great  public  domain  north  of  the 
Ohio  River.  In  1784  a  treaty  with  the  Indians  opened 
the  southern  part  of  this  territory  to  occupation  by  white 
settlers,  and  the  following  year  a  survey  of  the  region  was 
begun.  The  land  was  mapped  out  into  congressional  town- 
ships six  miles  square,  each  one  divided  into  thirty-six 
sections  of  six  hundred  and  forty  acres  each.  These  sec- 
tions the  Congress  offered  for  sale.  At  the  request  of 
a  group  of  New  England  men  who  contemplated  emigra- 
tion to  the  Ohio  country,  the  Congress  enacted  the  famous 
Ordinance  of  1787  for  the  government  of  the  Northwest 
Territory.  The  ordinance  guaranteed  representative  gov- 
ernment to  the  people  who  should  settle  the  territory  and 
stipulated  that  the  region  should  eventually  be  divided 
into  not  less  than  three  nor  more  than  five  States  which 
should  be  admitted  to  the  Union  on  equal  terms  with  exist- 
ing States.  Slavery  was  forever  excluded  from  the  ter- 
ritory, the  inhabitants  were  to  have  freedom  of  religion, 
one  section  of  land  in  every  township  was  set  aside  for  a 
public  school  system. 

Shortly  after  the  enactment  of  the  ordinance  the  Ohio 
Company,  an  organization  made  up  chiefl}^  of  officers  of 
the  Continental  army,  purchased  one  and  a  half  million 
acres  of  land  in  the  Muskingum  valley,  and  immediately 
sent  out  a  small  group  of  settlers  who  founded  the  town 
of  Marietta.  Members  of  the  Miami  Company  to  which 
Congress  sold  a  million  acres  between  the  Little  and  Great 
Miami  Rivers,  founded  the  city  of  Cincinnati.  The  new 
settlements  along  the  Ohio  met  with  the  same  difficulty 
which  injured  the  prosperity  of  all  the  Americans  west  of 


CRISIS  AND  CONSTITUTION  185 

the  mountains;  they  could  not  take  their  heavy  agricul- 
tural products  to  market.  Large  numbers  of  farmers 
solved  this  difficulty  in  part  by  converting  their  corn  into 
whisky,  which,  because  of  its  smaller  bulk,  could  be  car- 
ried on  packhorses  to  eastern  cities.  There  was  much  dis- 
satisfaction however  on  account  of  the  closing  of  the 
Mississippi.  For  a  brief  period  in  1789  the  authorities  in 
New  Orleans  opened  the  river  to  the  iSatboat  trade,  but 
only  long  enough  to  show  the  Westerners  how  much  they 
were  losing  by  not  having  the  right  of  free  navigation  at 
all  times.  \ 

Economic  Conditions  in  1789.  Except  in  the  Western 
communities  the  people  of  the  United  States  were  exceed-\ 
ingly  prosperous  in  1789.  The  business  crisis  and  the 
political  crisis  had  been  safely  passed.  The  new  Govern- 
ment came  into  existence  under  the  most  favorable  condi- 
tions and  its  success  was  assured  from  the  beginning.  No- 
body understood  the  situation  better  than  Washington,  who 
wrote  to  Lafayette  in  1788, 

"I  expect  that  many  blessings  will  be  attributed  to 
our  new  government,  which  are  now  taking  rise  from 
that  industry  and  frugality,  into  the  practice  of  which 
the  people  have  been  forced  from  necessity.  I  really 
believe,  that  there  never  was  so  much  labor  and  economy 
to  be  found  before  in  the  country  as  at  the  present 
moment.  If  they  persist  in  the  habits  they  are  acquir- 
ing, the  good  effects  will  soon  be  distinguishable.  When 
the  people  shall  find  themselves  secure  under  an  ener- 
getic government,  when  foreign  nations  shall  be  dis- 
posed to  give  us  equal  advantages  in  commerce  from 
dread  of  retaliation,  when  the  burdens  of  war  shall  be 
in  a  manner  done  away  by  the  sale  of  western  lands, 
when  the  seeds  of  happiness  which  are  sown  here  shall 
begin  to  expand  themselves,  and  when  every  one,  under 
his  own  vine  and  fig  tree,  shall  begin  to  taste  the  fruits 
of  freedom,  then  all  these  blessings  (for  all  these  bless- 
ings will  come)  will  be  referred  to  the  fostering  influence 


186  CRISIS  AND  CONSTITUTION 

of  the  new  government,  whereas  many  causes  will  have 
conspired  to  produce  them.  ..." 

Questions  and  Topics 

1.  Outline  the  economic  situation  in  one  State  previous 
to  the  Annapolis  Convention  and  tell  what  it  lost  or  gained 
by  the  adoption  of  the  Constitution. 

2.  What  do  you  think  would  have  happened  to  the  States 
if  no  strong  centralized  government  had  been  established? 

3.  Would  a  nation  be  more  or  less' prosperous  if  it  could 
furnish  all  its  own  products  and  neither  export  nor  import 
anything  ?     Why  ? 

4.  Make  a  list  of  all  the  causes  that  tended  to  discourage 
emigration  to  the  Western  lands  after  1763. 

5.  Why  were  the  various  States  more  jealous  and  quar- 
relsome at  the  period  after  the  Revolution  than  they  are 
now? 


CHAPTER  X 
THE  NEW  GOVERNMENT 

The  New  Government  Organized.  In  accordance  with 
the  directions  of  the  Congress  of  the  Confederation,  ten 
States  proceeded  to  choose  the  presidential  electors, 
senators  and  representatives  provided  for  in  the  Constitu- 
tion. New  York  took  no  part  in  the  election  of  the  first 
officers  of  the  Federal  Government  because  the  two  houses 
of  the  legislature  could  not  agree  upon  a  method  of  elec- 
tion. Though  March  4,  1789,  was  the  date  set  for  the 
new  Government  to  begin  its  work,  the  members  of  Con- 
gress were  so  slow  in  reaching  New  York  City  that  it  was 
not  until  April  6  that  quorums  of  both  houses  were  as- 
sembled. On  that  day  the  electoral  vote  was  counted  and 
a  messenger  despatched  to  Mount  Vernon  to  give  formal 
notification  to  Washington  that  he  had  been  the  unanimous 
choice  of  the  electors  for  the  presidency.  After  a 
triumphal  journey  to  New  York,  Washington  assumed 
office  on  April  30,  taking  the  oath  on  the  balcony  of  Fed- 
eral Hall  in  Wall  Street. 

It  was  necessary  for  Congress  to  establish  an  entirely 
new  organization  to  undertake  the  many  duties  which  the 
Constitution  imposed  upon  the  Federal  Government.  The 
old  Congress  had  possessed  few  powers  of  importance,  and 
with  the  exception  of  a  small  diplomatic  and  consular 
service  and  the  Post-office,  it  left  virtually  no  official 
machinery.  Congress  soon  created  three  important  execu- 
tive departments,  the  State,  War  and  Treasury  Depart- 
ments. It  provided  for  the  organization  of  the  Supreme 
Court,  deciding  that  the  court  should  consist  of  one  Chief 

187 


188  THE  NEW  GOVERNMENT 


'^^^^21/ 


THE  NEW  GOVERNMENT  189 

Justice  and  five  Associate  Justices;  it  established  a  num- 
ber of  inferior  Federal  courts  and  authorized  the  appoint- 
ment of  an  Attorney-General  to  assist  the  president  and 
the  courts  in  enforcing  Federal  laws. 

National  Revenues.  The  first  important  care  of  Con- 
gress was  to  get  money  to  meet  the  expenses  of  government 
and  to  pay  off  the  debts  inherited  from  the  Confederation. 
Exercising  its  constitutional  powers  of  taxation,  Congress 
enacted  a  law  July  4,  1789,  levying  duties  on  imports. 
Specific  or  ad  valorem  duties  were  placed  upon  a  large 
number  of  articles,  among  which  were  salt,  sugar,  molasses, 
tea,  coffee,  iron  and  manufactures  of  cotton,  wool  and 
glass.  Though  intended  primarily  as  a  revenue  measure, 
this  first  tariff  act  was  designed  also  to  give  encourage- 
ment to  the  manufacturing  industries  of  the  United  States, 
but  since  the  highest  duty  amounted  to  less  than  ten  per 
cent  of  the  value  of  the  taxed  article  it  cannot  be  said  that 
the  tariff  was  "protective"  in  the  modem  sense  of  the 
word.  The  revenues  under  this  law  were  not  large  enough 
to  meet  the  needs  of  Congress  and  the  duties  were  increased 
in  1790,  1792  and  1794.  Congress  also  imposed  tonnage 
taxes  upon  ships  which  entered  the  harbors  of  the  United 
States. 

In  the  first  tariff  law  and  in  the  law  establishing  tonnage 
duties  Congress  endeavored  to  protect  the  shipping  in- 
dustry. The  tariff  law  provided  for  a  reduction  of  ten 
per  cent  in  import  duties  when  the  taxed  goods  were  im- 
ported in  American  ships.  A  special  discrimination  was 
made  in  connection  with  the  tea  trade,  tea  imported  di- 
rectly from  China  in  American  vessels  being  taxed  from 
six  to  twenty  cents  a  pound,  that  imported  in  American 
vessels  from  Europe  from  eight  to  twenty-six  cents  a 
pound,  that  imported  in  foreign  vessels  from  fifteen  to 
forty-five  cents  a  pound.     Tonnage  taxes  on  vessels  built 


190  THE  NEW  GOVERNMENT 

and  owned  in  the  United  States  amounted  to  but  six  cents 
a  ton,  on  vessels  built  in  the  United  States  and  owned  by 
foreigners  the  tax  was  thirty  cents  a  ton,  and  on  vessels 
which  were  foreign  in  both  construction  and  ownership 
fifty  cents  a  ton.  Though  foreign  vessels  were  not  ex- 
cluded from  the  coastwise  trade  of  the  United  States,  they 
were  charged  a  tax  of  fifty  cents  a  ton  each  time  they  en- 
tered an  American  port,  while  American  vessels  in  the 
coasting  trade  were  required  to  pay  a  duty  of  six  cents  a 
ton  once  a  year.  Discriminating  tariff  and  tonnage  duties 
of  this  nature  were  continued  for  several  years.  They  did 
not  give  much  help  to  American  shipping,  however,  because 
foreign  nations  discriminated  in  favor  of  their  vessels  in  the 
same  manner.  What  a  vessel  gained  in  home  ports  through 
low  duties  it  lost  because  of  high  duties  in  foreign  ports. 
American  vessels  would  frequently  sail  for  foreign  ports 
without  cargo,  and  foreign  vessels  would  come  to  Ameri- 
can ports  without  cargo  to  avoid  the  excessive  tariff  duties. 
This  practice  was  uneconomical  and  served  only  to  make 
freight  rates  higher  than  they  might  otherwise  have  been. 
Congress  protected  the  shipbuilding  industry  by  permitting 
only  vessels  built  in  the  United  States  to  be  registered  un- 
der the  American  flag.  This  provision  of  our  shipping 
laws  remained  unchanged  till  1912. 

The  collection  of  the  tonnage  taxes  and  import  duties 
was  the  work  of  the  Treasury  Department.  Early  in  July, 
1789,  Congress  enacted  a  law  establishing  ''customs  dis- 
tricts" in  the  various  States,  naming  "ports  of  entry"  at 
which  goods  should  be  entered  for  the  payment  of  duties, 
and  authorizing  the  appointment  of  customs  officials  who 
should  undertake  the  actual  work  of  carrying  out  the  pro- 
visions of  the  revenue  and  shipping  laws.  Early  in  August 
the  customs  force  was  fully  organized.  In  1791,  Congress 
passed  a  law  imposing  excise  taxes  upon  spirituous  liquors, 


THE  NEW  GOVERNMENT  191 

and  the  Treasury  Department  established  an  internal  reve- 
nue service  to  collect  these  taxes. 

National  Credit.  Washington  chose  Alexander  Hamil- 
ton as  his  Secretary  of  the  Treasury,  Hamilton  worked 
earnestly  to  put  the  finances  of  the  National  Government 
upon  a  sound  basis.  He  induced  Congress  to  authorize 
the  issue  of  six  per  cent  government  "stock"  or  bonds,  to 
be  given  in  exchange  for  the  outstanding  obligations  of 
the  United  States.  He  also  succeeded  in  persuading  Con- 
gress to  enact  a  law  in  1790  providing  that  the  Federal 
Government  should  assume  the  debts  of  the  States.  There 
was  much  opposition  to  this  measure,  particularly  from 
those  States  which  had  already  paid  off  a  large  portion  of 
their  Revolutionary  War  debts,  but  Hamilton  won  over 
some  Southern  opponents  to  his  plan  by  effecting  an  ar- 
rangement for  the  location  of  the  permanent  capital  of 
the  country  on  the  bank  of  the  Potomac  River.  The  total 
debt  of  the  nation  after  Hamilton's  program  was  carried 
out  was  $75,000,000.  Before  his  funding  scheme  was 
adopted,  the  interest  bearing  obligations  of  the  United 
States  were  selling  for  about  one-fourth  of  their  nominal 
value.  With  the  receipts  from  customs  duties  and  other 
taxes  the  Treasury  began  to  meet  promptly  the  interest  pay- 
ments on  the  new  bonds.  They  immediately  began  to  rise 
in  value,  and  within  two  years  were  selling  at  par.  Hamil- 
ton had  successfully  established  the  credit  of  the  Govern- 
ment both  at  home  and  abroad. 

The  United  States  Bank.  Another  important  feature  of 
Hamilton's  financial  policy  was  the  establishment  of  a 
national  bank.  At  the  time  of  the  adoption  of  the  Consti- 
tution there  were  only  three  banks  in  the  United  States, 
the  Bank  of  North  America  in  Philadelphia,  the  Bank  of 
Massachusetts  in  Boston,  and  the  Bank  of  New  York.  The 
Bank  of  North  America  had  been  chartered  by  the  Con- 


192  THE  NEW  GOVERNMENT 

gress  of  the  Confederation  in  1781,  but  because  some  doubt 
existed  as  to  the  right  of  the  Congress  to  charter  a  bank, 
the  directors  secured  an  additional  charter  from  the  State 
of  Pennsylvania.  This  bank  gave  great  help  to  Robert 
Morris  in  the  management  of  the  finances  of  the  Govern- 
ment during  the  closing  years  of  the  Revolution,  but  after 
the  war  its  connection  with  the  Government  ended. 

Hamilton  desired  to  create  a  strong  financial  institution 
which  could  make  loans  to  the  Government  in  time  of  emer- 
gency and  could  act  as  a  fiscal  agent,  aiding  in  the  collection 
of  revenues  and  in  the  disbursement  of  public  funds.  He 
thought  such  a  bank  would  be  of  great  benefit  to  business. 
It  would  afford  an  opportunity  for  safe  investment,  it 
would  help  business  men  in  their  commercial  transactions, 
and  it  would  issue  notes  to  be  used  as  currency.  The  law 
authorizing  a  bank  such  as  Hamilton  suggested  was  passed 
early  in  1791.  The  charter  provided  that  the  bank  should 
be  capitalized  for  $10,000,000.  Of  this  amount  the  gov- 
ernment might  subscribe  $2,000,000,  and  private  investors 
$8,000,000,  one-fourth  in  specie  and  three-fourths  in  Gov- 
ernment bonds.  The  notes  of  the  bank  were  to  be  receiv- 
able for  taxes  as  long  as  the  notes  were  redeemable  in  specie 
at  the  bank.  The  amount  of  notes  which  the  bank  might 
issue  was  limited  to  the  amount  of  its  capital  stock.  The 
Secretary  of  the  Treasury  was  authorized  to  inspect  the 
bank's  affairs  at  any  time  and  to  require  reports  from  its 
officers.  The  bank  was  permitted  to  establish  branches 
wherever  the  directors  thought  it  advisable. 

The  stock  of  the  new  Bank  was  oversubscribed  within 
two  hours  after  the  subscription  books  were  opened.  The 
Bank  started  business  in  Philadelphia  in  December,  1791, 
and  from  the  beginning  it  was  a  great  success.  Since  the 
Bank's  stock  was  paid  for  partly  with  Government  bonds 
the  rising  credit  of  the  Government  strengthened  the  Bank, 
and  the  prosperity  of  the  Bank  in  turn  aided  in  the  main- 


THE  NEW  GOVERNMENT  193 

tenance  of  Government  credit.  The  Treasury  kept  about 
two-thirds  of  the  public  money  on  deposit  with  the  Bank, 
and  employed  it  regularly  as  a  fiscal  agent.  The  managers 
of  the  Bank  were  conservative  in  granting  loans  and  the 
institution  had  no  difficulty  whatever  in  redeeming  its 
notes  and  other  obligations  in  specie.  It  refused  to  receive 
notes  of  non-specie-paying  banks,  thereby  compelling  all 
banks  established  by  the  States  to  follow  conservative  and 
honest  methods  of  banking.  Commerce  and  industry  were 
quickened  by  the  creation  of  a  safe  and  reliable  currency, 
and  business  men  everywhere  gave  their  earnest  support  to 
the  Bank  and  to  the  Government  which  established  it. 

Currency  and  Coinage.  One  effect  of  the  new  Bank  was 
the  substitution  of  dollars  and  cents  for  pounds,  shillings 
and  pence  as  the  standard  of  value  in  exchanges  and  in  com- 
mercial accounts.  Though  the  Congress  of  the  Confedera- 
tion had  issued  bills  of  credit  promising  the  payment  of 
Spanish  milled  dollars  and  had  later  formally  adopted  the 
dollar  as  the  monetary  unit  of  the  country,  people  had  con- 
tinued to  use  English  currency  as  a  standard.  Washington 
kept  his  accounts  during  the  Revolutionary  war  in  terms  of 
English  currency,  calculating  the  value  of  the  continental 
bills  in  English  money  according  to  the  prevailing  scale  of 
depreciation.  Virtually  all  the  coins  in  the  country  before 
1794  were  foreign  coins.  Their  value,  which  depended 
upon  the  amount  of  metal  which  they  contained,  was  stated 
in  terms  of  English  money.  When  the  notes  of  the  Bank 
began  to  circulate  freely,  people  gradually  adopted  the 
dollar  as  the  unit  of  their  business  transactions,  though 
there  was  no  change  in  the  metallic  currency  of  the  nation. 

In  1792  Congress  passed  the  first  coinage  act.  The  valu- 
ation of  the  Spanish  milled  dollar  was  24.75  grains  of  gold, 
and  this  was  made  the  value  of  the  American  dollar.  Since 
one  grain  of  gold  was  thought  to  be  equivalent  in  value  to 
fifteen  grains  of  silver  the  coinage  act  provided  that  the 


194  THE  NEW  GOVERNMENT 

silver  dollar  should  contain  15  X  24.75  or  371.25  grains  of 
pure  silver.  Gold  and  silver  were  to  be  coined  freely  at 
this  ratio  of  15  to  1.  The  half-dollar  was  to  contain  one- 
half  as  much  pure  silver  as  the  dollar  and  smaller  silver 
coins  were  likewise  to  be  of  proportionate  weight.  Con- 
gress decided  that  until  the  new  national  coinage  was  avail- 
able certain  foreign  coins  already  common  should  be  legal 
tender  according  to  the  weight  of  metal  in  them. 

Though  the  mint  began  to  coin  silver  in  1794  and  gold 
in  1795,  it  failed  to  provide  the  country  with  a  new  metallic 
currency.  Silver  was  slightly  overvalued.  One  grain  of 
gold  was  the  equivalent  of  fifteen  grains  of  silver  in  United 
States  coin,  but  in  the  bullion  market  it  was  equivalent  to 
15.47  grains  of  silver.  In  other  words  people  in  the  United 
States  could  exchange  one  hundred  dollars  in  silver  coin 
for  one  hundred  dollars  in  gold  coin,  and  exchange  the 
bullion  in  the  gold  coin  for  silver  bullion  enough  to  make 
103.13  dollars.  Under  such  conditions  gold  coins  were 
exported  as  fast  as  they  came  from  the  mint,  and  the  only 
domestic  coins  were  of  silver. 

The  first  silver  dollars  coined,  though  less  in  weight  than 
new  Spanish  milled  dollars,  were  accepted  in  West  India 
trade  at  the  value  of  the  Spanish  dollars.  This  caused 
merchants  to  export  the  American  dollars  and  exchange 
them  for  Spanish  dollars,  which  were  brought  home,  melted, 
and  recoined  into  American  dollars,  a  profit  of  about  one 
per  cent  being  made  on  such  a  transaction.  This  process 
could  not  have  lasted  long,  but  since  the  mint  was  work- 
ing for  the  bullion  merchants  without  pay  and  was  not 
giving  the  country  a  supply  of  silver  dollars  for  home  use, 
the  coinage  of  dollars  was  ordered  to  be  stopped  in  1806. 
Until  the  coinage  system  was  ordered  changed  in  1834,  tlie 
only  domestic  coins  in  circulation  were  the  coins  of  small 
denomination.  Since  the  number  minted  was  not  large 
enough  to  meet  the  needs  of  trade  the  country  continued 


THE  NEW  GOVERNMENT  195 

to  use  the  silver  and  copper  coins  of  foreign  countries. 

The  Patent  Law.  Another  law  which  Congress  enacted 
for  the  encouragement  and  protection  of  individual  en- 
terprise was  the  patent  law  of  1790,  which  secured  to  the 
inventor  of  ' '  any  useful  art,  manufacture,  engine,  machine, 
or  device,  or  any  improvement  therein  not  before  known 
or  used ' '  an  exclusive  monopoly  of  sale  for  a  term  of  four- 
teen years.  It  was  not  long  before  American  inventors 
were  seeking  the  protection  of  this  law. 

A  Prosperous  Nation.  Wliile  Congress  was  providing 
for  the  organization  of  the  new  Government  and  adopting 
measures  for  the  encouragement  of  industry  and  commerce, 
the  nation  as  a  whole  was  vigorously  prosperous.  Through- 
out Washington's  first  administration  business  was  un- 
usually good,  and  the  people  rallied  to  the  support  of  the 
new  Government  with  an  increasing  measure  of  confidence 
and  respect.  Two  events  of  singular  importance  occurred 
during  this  period.  They  marked  the  beginning  of  an 
economic  revolution  in  the  United  States.  One  was  the  in- 
troduction of  the  "factory  system,"  the  other  was  the  in- 
vention of  the  cotton  gin. 

The  Industrial  Revolution.  During  the  latter  part  of 
the  eighteenth  and  the  early  years  of  the  nineteenth  cen- 
tury, the  industry  of  the  civilized  world  underwent  a  pro- 
found change.  This  change  was  caused  by  two  things,  the 
application  of  machinery  to  manufacturing  processes  and 
the  use  of  steam  as  a  source  of  power.  ^Machines  began  to 
perform  a  part  of  the  work  which  had  previously  been 
accomplished  only  by  human  hands ;  steam  engines  were 
used  to  drive  the  machines  employed  in  manufacturing  and 
to  provide  the  power  for  transportation  on  water  and  on 
land.  The  great  change  which  the  use  of  steam-driven 
machinery  brought  about  in  industry  has  been  termed  the 
"industrial  revolution." 

One  of  the  first  important  events  of  the  industrial  revo- 


196  THE  NEW  GOVERNMENT 

lution  occurred  in  1767  when  James  Hargreaves,  an  Eng- 
lish weaver,  invented  the  spinning- jenny,  Hargreaves 
found  it  difficult  to  obtain  from  the  spinners  in  his  neigh- 
borhood enough  yarn  to  keep  his  loom  going.  The  old- 
fashioned  spinning  wheel  drove  only  one  spindle ;  he  made 
a  machine  to  drive  eight  spindles  at  once.  Two  years  after 
the  invention  of  the  spinning-jenny,  Richard  Arkwright 
invented  a  "drawing-frame"   or   "throstle"   which   sup- 


Samuel  Slater 

From  Hunt's  Lives  of  American  Merchants 

planted  the  hand  in  "drawing  out"  the  carded  cotton  or 
wool  before  it  was  spun.  A  few  years  later  Samuel  Cromp- 
ton  combined  the  invention  of  Hargreaves  and  Arkwright 
into  the  "mule-spinner,"  a  machine  which  carried  a  large 
number  of  spindles  and  did  the  work  of  drawing,  spinning 
and  winding.  The  process  of  carding  cotton  had  mean- 
while been  greatly  improved,  and  yarn  was  produced  much 
more  rapidly  than  the  weavers  could  use  it.     This  difficulty 


THE  NEW  GOVERNMENT  197 

was  solved  in  1785  when  Edmund  Cartwright  invented  the 
power-loom  to  take  the  place  of  the  hand-loom  so  long  used 
by  English  weavers. 

The  invention  of  power-driven  machinery  made  it  neces- 
sary to  transfer  the  spinning  and  weaving  industries  from 
workmen's  homes  to  factories.     The  old  domestic  system 
of  industry,  in  which  the  worker  owned  all  his  tools  and 
often  bought  his  own  raw  materials  and  marketed  the 
product  of  his  industry,  came  to  an  end,  to  be  replaced  by 
the  ''factory  system,"  in  which  raw  materials,  tools  and 
finished  products  were  owned  by  capitalists,  and  the  work- 
men labored  for   daily  wages.     At  first  the  new  textile 
machinery  was  operated  entirely  by  water  power,  but  by 
the  close  of  the  eighteenth  century  the  stationary  steam- 
engine  was  sufficiently  developed  to  afford  a  reliable  and 
economical  source  of  power  in  numerous  English  factories. 
The  new  textile  machinery  was  not  introduced  in  the 
United  States  until  several  years  after  its  invention.     The 
British   government  would  permit   neither   drawings  nor 
models  of  the  new  devices  to  be  taken  from  the  country. 
In  1789  Samuel  Slater,  who  had  served  as  an  apprentice 
under  Richard  Arkwright's  partner,  emigrated  to  America. 
The  following  year,  with  the  aid  of  American  capital,  he 
built  a  cotton  mill,  to  be  operated  by  water  power,   at 
Pawtucket,  Rhode  Island,  constructing  entirely  from  mem- 
ory the  machinery  for  carding,  roving  and  spinning.     This 
was  the  first  American   factory  for  the  manufacture  of 
cotton  yarn. 

The  Cotton  Gin.  The  invention  of  spinning  and  weav- 
ing machinery  in  England  resulted  in  a  greatly  increased 
production  of  textiles,  which  in  turn  created  an  urgent  de- 
mand for  greater  and  greater  supplies  of  raw  materials. 
In  1775  British  cotton  manufacturers  used  less  than  five 
million  pounds  of  cotton ;  in  1786  they  used  twenty  million 
pounds.     Three-fourths  of  this  supply  was  imported  from 


198 


THE  NEW  GOVERNMENT 


the  West  Indies  and  nearly  all  the  remainder  from  Egypt. 
Only  a  few  thousand  pounds  were  imported  from  the 
United  States;  cotton  was  not  yet  an  important  export  of 
this  country.  However,  the  increasing  demand  for  cotton 
served  to  arouse  the  interest  of  southern  plantation  own- 
ers, and  a  number  of  them  began  to  raise  it  on  a  more 
extensive  scale.  In  1792  the  exports  were  about  150,000 
pounds  and  in  1793  almost  500,000  pounds.  While  cotton 
could  be  easily  raised  in  the  South,  it  was  not  a  highly 


Eli  \Yhitney 

profitable  product  because  of  the  labor  it  took  to  separate 
the  fiber  from  the  seeds.  A  machine  was  needed  to  accom- 
plish this  work  before  cotton  culture  could  become 
profitable. 

The  need  of  such  a  machine  was  called  to  the  attention 
of  Eli  Whitney,  a  graduate  of  Yale  College,  who  went  to 
Georgia  in  1792  to  secure  a  position  as  a  school-teacher,  and 
Whitney  devised  the  cotton  gin.     In  his  model  the  teeth  of 


THE  NEW  GOVERNMENT  199 

revolving  circular  saws  pulled  the  cotton  fiber  through  a 
wire  grating  the  openings  of  which  were  too  small  to 
permit  the  seeds  to  pass.  Brushes  were  arranged  to  remove 
the  cotton  fiber  from  the  saw  teeth.  This  contrivance, 
operated  by  a  man  and  a  horse,  could  clean  more  cotton 
in  a  day  than  three  hundred  men  could  clean  by  hand. 
Before  Whitney  could  obtain  a  patent  a  large  number  of 
gins  were  put  into  operation  in  Georgia  and  South  Caro- 
lina, and  after  the  patent  was  granted  he  failed  to  secure 
any  royalties  on  the  invention.  The  legislature  of  South 
Carolina  gave  Whitney  $50,000,  nearly  all  of  which  he  lost 
in  expensive  litigation  over  patent  rights. 

Though  the  cotton  gin  earned  nothing  for  its  inventor, 
it  made  millions  for  the  Southern  planters,  and  completely 
transformed  Southern  industry.  In  1795  more  than  six 
million  pounds  of  cotton  were  exported,  and  five  years 
later  the  exports  amounted  to  eighteen  million  pounds. 
Within  fifteen  years  after  the  cotton  gin  was  invented,  cot- 
ton became  the  leading  export  of  the  United  States.  One 
effect  of  cotton  culture  was  to  give  renewed  strength  to  the 
institution  of  negro  slavery.  Cotton  culture  created  a 
demand  for  cheap,  unskilled  labor,  and  in  the  Southern 
States  all  thought  of  abolishing  slavery  vanished. 

Transportation  Improvements.  One  indication  of  the 
advancing  prosperity  of  the  nation  during  the  early  years 
of  the  new  Government  was  the  general  interest  in  the 
improvement  of  transportation  facilities.  The  improve- 
ments of  greatest  importance,  which  were  completed  at 
this  time,  were  a  number  of  turnpikes,  constructed  in  the 
New  England  and  the  IMiddle  Atlantic  States.  These 
turnpikes  were  improved  highways  built  by  private  cor- 
porations. State  and  local  governments  were  yet  unable 
to  raise  by  taxation  sufficient  money  to  build  needed  high- 
ways, but  State  legislatures  readily  gave  charters  to  cor- 
porations, authorizing  them  to  construct  roads  and  charge 


200 


THE  NEW  GOVERNMENT 


tolls  for  their  use.  At  the  points  where  tolls  were  collected 
long  poles  armed  with  sharp  pikes  were  mounted  on  posts 
in  such  a  manner  that  they  could  be  swung  across  the 
highway.     From  these  poles  the  roads  took  their  names. 

The  first  turnpike  company  of  importance  was  one  char- 
tered by  the  Pennsylvania  legislature  in  1792  to  build  an 
improved  road  between  Philadelphia  and  Lancaster.  The 
latter  city,  at  that  time,  was  the  largest  city  in  the  United 
States  not  situated  on  a  navigable  waterway.  It  had  a 
large  trade  with  Philadelphia  over  a  road  which  frequently 


Model  of  Conestoga  Wagon 
Courtesy  of  V.  S.  National  Museum. 

became  impassable.  The  Lancaster  turnpike  was  completed 
in  1794.  Lancaster  Avenue,  Philadelphia,  which  joins  Mar- 
ket Street  a  short  distance  west  of  the  Schuylkill  River,  is 
a  part  of  the  old  Lancaster  turnpike.  The  charter  named 
the  tolls  which  the  company  might  charge  for  the  use  of  its 
road.  For  every  space  of  ten  miles  the  tolls  for  a  score  of 
sheep  or  of  hogs  were  one-eighth  of  a  dollar,  for  a  score  of 
cattle  one-fourth  of  a  dollar;  for  a  horse  and  rider  one- 
sixteenth  of  a  dollar ;  for  a  two-horse  carriage  one-fourth  of 
a  dollar;  for  wagons  the  amount  varied  according  to  the 


THE  NEW  GOVERNMENT  201 

width  of  wheels  and  number  of  horses.  The  traffic  on 
the  new  highway  was  large  from  the  beginning  and  the 
stockholders  of  the  company  found  their  investment  a 
most  profitable  one.  Individuals  in  several  States  formed 
similar  corporations,  and  within  a  few  years  a  number  of 
improved  toll-roads  were  constructed,  some  of  which  still 
remain  the  property  of  private  corporations,  though  most 
of  them  have  long  since  been  bought  by  State  or  local 
governments. 

Improved  highways  offered  a  much  better  and  even  a 
cheaper  means  of  transportation  than  the  poor  roads  which 
they  supplanted,  but  they  could  not  solve  the  problem  of 
transportation  over  long  distances.  As  the  population  of 
the  interior  districts  increased,  the  transportation  question 
became  more  and  more  pressing,  and  in  several  States  a  be- 
ginning was  made  in  the  construction  of  artificial  water- 
ways. In  1792  the  New  York  legislature  chartered  two 
corporations,  the  Western  and  the  Northern  Inland  Lock 
and  Navigation  Companies,  the  former  being  authorized 
to  provide  a  navigable  waterway  from  the  Hudson  River  to 
Seneca  Lake  and  Lake  Ontario,  and  the  latter  to  open  com- 
munication with  Lake  Champlain.  The  Western  Company 
soon  began  work  and  by  building  locks  and  canals  at  Little 
Falls  and  Fort  Stanwix  (Rome)  succeeded,  by  1797,  in 
establishing  a  water  route  through  the  Mohawk  Valley  west 
of  Schenectady.  The  Massachusetts  legislature  chartered 
a  company  in  1793  to  build  a  canal  from  Boston  to  the  Mer- 
rimac  River.  In  1794  the  Dismal  Swamp  Canal  was  com- 
pleted between  Albemarle  Sound  and  Chesapeake  Bay. 
None  of  these  early  waterways  was  of  great  importance. 
There  was  not  yet  sufficient  private  capital  in  the  country 
for  large  improvements,  and  the  Federal  and  State  gov- 
ernments were  not  yet  ready  to  undertake  the  work. 

Isolation  of  the  West;  the  Whisky  Rebellion.  While 
the  people  living  on  the  Atlantic  coast  were  enjoying  great 


202  THE  NEW  GOVERNMENT 

economic  prosperity  the  people  in  the  region  west  of  the 
Appalachian  highland  continued  to  suffer  because  of  the 
refusal  of  Spain  to  permit  the  free  navigation  of  the  Mis- 
sissippi River.  The  first  census  of  the  United  States,  taken 
in  1790,  showed  that  Kentucky  had  75,000  and  Tennessee 
35,000  inhabitants.  Several  thousand  people  lived  in  the 
western  counties  of  Pennsylvania,  and  a  few  hundred  in 
Ohio.  With  no  way  of  getting  their  agricultural  produce 
to  market  the  settlers  of  the  "West  became  each  year  more 
restless  and  discontented.  When,  in  1791,  the  new  gov- 
ernment laid  a  tax  on  whisky,  which  was  the  only  form 
in  which  the  Western  farmers  could  take  their  grain  to 
Eastern  markets,  the  people  became  violently  angry.  In 
1794  an  armed  rebellion  was  attempted  in  western  Penn- 
sylvania, and  it  became  necessary  for  President  Washing- 
ton to  send  troops  to  restore  order  and  enforce  the  law. 

Opening-  of  the  Mississippi.  Anxious  to  avoid  a  renewal 
of  trouble,  and  understanding  the  difficulty  of  the  Western 
farmers,  the  president  began  negotiations  with  Spain  for 
the  opening  of  the  river.  Because  of  unsettled  conditions 
in  Europe,  the  King  of  Spain  was  anxious  to  establish 
friendly  relations  with  America,  and  in  October,  1795,  a 
treaty  was  signed  in  which  the  object  of  the  American 
Government  was  attained.  The  people  of  the  United  States 
received  the  right  of  free  navigation  of  the  ^Mississippi, 
and  they  also  obtained  the  "right  of  deposit"  at  New 
Orleans.  By  this  right  the  Western  farmers  were  per- 
mitted to  land  their  products  at  the  Spanish  port  and  ship 
them  to  other  markets  without  the  payment  of  duties  to 
the  Spanish  authorities.  The  treaty  provided  that  this 
right  of  deposit  should  be  given  at  New  Orleans  for  at  least 
three  years,  and  if  not  continued  at  that  port  an  "equiva- 
lent establishment"  would  be  assigned  on  another  part  of 
the  banks  of  the  river. 

The  negotiation  of  this  treaty  was  hailed  with  much 


THE  NEW  GOVERNMENT  203 

rejoicing  in  Tennessee,  Kentucky,  Ohio  and  Pennsylvania. 
Fleets  of  flat-boats  loaded  with  tlour,  grain,  tobacco,  pork 
and  whisky  began  to  move  down  the  river.  The  owner 
of  a  flat-boat  would  dispose  of  his  cargo  at  New  Orleans, 
break  up  the  boat  and  sell  the  lumber,  after  which  he 
would  sail  for  Baltimore  or  Philadelphia.  Here  he  would 
buy  shoes,  cotton  cloth,  farm  and  household  equipment, 
rifles  and  gunpowder  to  be  transported  to  his  home  across 
the  mountains  on  packhorses  or  in  strong  wagons.  The 
entire  journey  usually  took  six  months.  The  opening  of 
the  river  was  a  fortunate  occurrence.  It  brought  pros- 
perity to  the  Western  people  and  made  them  friends  and 
supporters  of  the  new  Government. 

In  his  annual  message  to  Congress  in  December,  1795, 
President  Washington  was  able  to  say, 

''Our  agriculture,  commerce,  and  manufactures 
prosper  beyoiid  former  example.  .  .  .  Our  population 
advances  with  a  celerity  which,  exceeding  the  most 
sanguine  calculations,  proportionally  augments  our 
strength  and  resources,  and  guarantees  our  future  se- 
curity. Every  part  of  the  Union  displays  indications 
of  rapid  and  various  improvement;  and  with  burthens 
so  light  as  scarcely  to  be  perceived,  with  resources  fully 
adequate  to  our  present  exigencies,  with  government 
founded  on  genuine  principles  of  rational  liberty,  and 
with  mild  and  wholesome  laws,  is  it  too  much  to  say 
that  our  country  exhibits  a  spectacle  of  material  happi- 
ness never  surpassed,   if  ever  equaled?" 

Foreign  Commerce.  While  agriculture  and  other  eco- 
nomic activities  were  making  progress  there  was  a  steady 
expansion  of  foreign  trade.  Exports  of  tobacco,  bread- 
stuffs,  fish,  skins,  and  lumber  continued  to  flow  in  a  steady 
stream  to  West  Indies,  European  and  Oriental  markets; 
in  exchange  the  United  States  received  sugar,  tea  and  man- 
ufactured goods.  During  the  three  years  following  1789 
American  exports  had  an  annual  value  of  twenty  million 


204  THE  NEW  GOVERNMENT 

dollars,  and  the  value  of  imports  was  somewhat  greater. 
A  large  part  of  this  foreign  trade  was  carried  in  American 
vessels;  each  year  the  merchant  fleet  under  the  American 
flag  showed  a  gratifying  increase  in  tonnage. 

In  1793  war  broke  out  between  France  and  Great  Britain. 
Until  1815,  except  for  a  brief  interruption  of  one  year,  the 
entire  continent  of  Europe  was  shaken  with  a  series  of 
conflicts  known  as  the  Napoleonic  Wars.  These  struggles 
had  a  marked  effect  upon  American  commerce  and  in  an 
attempt  to  defend  the  right  of  peaceful  trade  the  United 
States  finally  became  involved  in  another  war  with  Great 
Britain.  How  this  came  about  will  be  told  in  the  follow- 
ing chapter. 

Questions  and  Topics 

1.  How  many  Executive  Departments  have  we  at  the 
present  time  ?     What  are  they  ? 

2.  Compare  our  sources  of  national  revenue  in  1789  with 
present  sources. 

3.  What  advantage  had  the  American  sj'stem  of  coinage 
over  that  used  in  England  ? 

4.  How  did  the  industrial  revolution  affect  the  home? 

5.  Can  you  trace  any  relation  between  the  industrial  rev- 
olution and  woman's  present  place  in  the  industrial  world? 


CHAPTER  XI 
THE  STRUGGLE  FOR  NEUTRALITY 

Washington's  Proclamation  of  Neutrality.  When  war 
began  between  France  and  Great  Britain  in  1793,  many 
people  in  the  United  States  felt  that  this  country  should 
enter  the  war  on  the  side  of  France.  Some  thought  that  our 
Government  was  bound  to  take  this  course  by  the  treaty 
of  1778  in  which  the  United  States  guaranteed  to  France 
"forever,  against  all  other  powers"  possession  of  the 
French  colonies  in  America.  On  the  other  hand,  many 
people  thought  that  the  treaty  of  1778  had  been  abrogated 
because  the  French  monarchy  existing  at  the  time  the  treaty 
was  negotiated  had  been  overthrown  between  1789  and 
1793,  the  king  executed,  and  a  French  republic  established. 
Though  the  members  of  Washington's  cabinet  were  divided 
upon  the  question  of  the  validity  of  the  treaty  of  1778,  they 
united  in  advising  the  President  that  it  would  be  wise  for 
the  United  States  to  stay  out  of  the  war.  President  Wash- 
ington issued  a  proclamation  on  April  22,  1793,  announcing 
the  impartial  attitude  of  the  United  States  Government  in 
the  European  war,  and  admonished  all  citizens  to  govern 
their  actions  accordingly. 

The  French  authorities  w^ere  greatly  displeased  with 
Washington's  attitude.  They  had  confidently  expected 
the  United  States  to  join  France  in  the  war  and  had  sent 
over  a  special  minister,  "Citizen"  Genet,  to  make  arrange- 
ments for  American  cooperation.  When  the  proclamation 
of  neutrality  was  issued,  Genet  endeavored  to  stir  up  the 
people  against  Washington.  His  unwarranted  action 
caused  public  opinion  to  turn  against  France. 

205 


206  STRUGGLE  FOR  NEUTRALITY 

Effect  of  Neutrality  on  American  Commerce.  The  first 
effect  of  the  neutral  position  of  the  United  States  was  to 
stimulate  the  carrying  trade  of  American  ships.  A  large 
number  of  British  vessels  were  withdrawn  from  the  mer- 
chant marine  to  be  devoted  to  naval  service.  The  great 
superiority  of  the  British  navy  made  it  virtually  impos- 
sible for  French  merchant  vessels  to  traverse  the  seas. 
The  United  States  was  the  only  neutral  nation  with  a  large 
tonnage  of  shipping,  and  American  vessels  were  soon  in 
demand  everywhere.  In  a  few  years  the  transatlantic  com- 
merce between  European  countries  and  their  American 
colonies  was  carried  largely  in  American  ships,  and  a  large 
part  of  the  carrying  trade  between  European  nations  was 
conducted  under  the  American  flag. 

In  addition  to  stimulating  the  business  of  American  ship- 
ping the  war  in  Europe  caused  an  increase  of  American  ex- 
ports. Many  Europeans  were  transferred  from  industrial 
to  military  pursuits  and  the  lessened  production  was  re- 
flected in  a  demand  for  American  commodities.  The  ex- 
ports of  domestic  products  of  the  United  States  advanced 
in  value  from  about  $19,000,000  in  1792  to  nearly  $41,- 
000,000  in  1796. 

British  and  French  Interference  with  American  Com- 
merce. Upon  the  beginning  of  the  war  both  France  and 
Great  Britain  adopted  the  customary  policy  of  endeavor- 
ing to  cripple  the  enemy's  commerce.  Such  a  policy  in- 
volved not  only  the  capture  of  enemy  shipping  but  the 
prevention,  if  possible,  of  enemy  commerce  in  neutral  ship- 
ping. On  May  9,  1793,  French  naval  vessels  were  ordered 
to  seize  all  neutral  ships  laden  with  grain,  and  on  June  8, 
British  ships  received  similar  orders.  In  November  orders 
were  given  to  British  naval  commanders  to  stop  all  ships 
laden  with  French  colonial  products  as  well  as  all  ships 
carrying  provisions  and  supplies  to  French  colonies,  and 
to  send  such  vessels  to  British  ports,  where  they  were  con- 


STRUGGLE  FOR  NEUTRALITY  207 

demned  and  sold.  Under  the  first  orders  a  number  of 
cargoes  of  American  grain  were  seized  by  British  and 
French  warships,  and  under  Great  Britain's  second  order 
a  large  number  of  American  ships  trading  with  French 
West  Indian  colonies  were  seized  and  confiscated  by  the 
British  government. 

The  United  States  Government  protested  vigorously 
against  these  acts,  claiming  that  neutral  ships  and  cargoes 
bound  for  unblockaded  ports  in  belligerent  countries  were 
not  properly  subject  to  seizure  unless  the  cargoes  consisted 
of  contraband  of  war,  and  that  grain  was  not  contraband. 
The  United  States  contended  moreover  that  "free  ships 
make  free  goods,"  and  denied  the  right  of  a  belligerent 
nation  to  confiscate  enemy  property  found  on  neutral  ships. 
Because  of  these  protests  Great  Britain  modified  her  or- 
ders January  8,  1794.  She  refused  to  accede  to  the  prin- 
ciple that  "free  ships  make  free  goods,"  and  ordered  the 
seizure  of  enemy  property  on  neutral  vessels.  Orders  were 
given  to  seize  all  vessels  carrying  contraband  of  war  to 
French  ports  and  all  vessels  bound  for  blockaded  ports. 
Directions  were  likewise  given  to  seize  ships  carrying  car- 
goes from  French  colonies  directly  to  Europe.  This  last 
order  was  a  revival  of  the  so-called  "Rule  of  1756,"  in 
which  Great  Britain  had  laid  down  the  principle  that  if  a 
European  country  excluded  foreign  vessels  from  its  co- 
lonial trade  in  time  of  peace  it  could  not  legally  open  that 
trade  to  the  ships  of  neutral  nations  in  time  of  war. 
France  had  long  followed  the  policy  of  confining  trade  be- 
tween French  colonies  and  the  mother  country  to  French 
ships.  However,  when  France  got  into  war  with  England, 
the  French  merchant  marine  was  usually  driven  from  the 
sea,  and  the  only  way  for  France  to  get  the  products  of 
her  colonies  was  to  permit  their  transportation  in  foreign 
shipping.  When  the  war  broke  out  in  1793,  American 
vessels  immediately  began  to  carry  French  colonial  prod- 


208  STRUGGLE  FOR  NEUTRALITY 

ucts  to  France.  This  practice  Great  Britain  held  to  be 
illegal.  The  shipowners  of  the  United  States  easily  evaded 
the  restrictions  of  the  Rule  of  1756,  however,  by  the  simple 
expedient  of  carrying  French  West  India  products  to  their 
home  ports  in  the  United  States  and  then  reexporting  them 
to  European  ports.  Great  Britain,  for  the  time  being, 
did  not  interfere  with  this  practice. 

Had  the  commercial  restrictions  contained  in  the  British 
orders  of  January  8,  1794  been  the  only  grievance  of  the 
United  States  against  Great  Britain,  there  would  have  been 
little  trouble  between  the  two  nations.  Unfortunately, 
however,  Great  Britain  followed  a  course  of  conduct  which 
was  obviously  designed  to  provoke  resentment  and  anger  in 
this  country.  She  refused  to  surrender  the  military  posts 
which  she  still  occupied  in  the  western  territory  of  the 
United  States;  she  persisted  in  her  policy  of  excluding 
American  vessels  from  her  West  Indian  possessions;  she 
refused  to  make  reparation  for  the  ships  and  cargoes  ille- 
gally seized  and  confiscated ;  and  she  adopted  the  practice  of 
"impressment,"  authorizing  British  naval  commanders  to 
search  neutral  ships  and  seize  for  naval  duty  any  British 
seamen  found  on  such  ships.  This  practice  of  impressment 
resulted  in  the  frequent  search  of  American  ships  and  on 
several  occasions  native  American  sailors  were  impressed 
into  British  naval  service  on  the  pretext  that  they  were  of 
British  birth. 

Early  in  1794  it  seemed  for  a  time  that  the  United  States 
would  declare  war  on  Great  Britain.  President  Washing- 
ton decided,  however,  to  make  a  last  effort  to  preserve  peace, 
and  he  sent  Chief  Justice  John  Jay  to  England  to  present 
the  views  of  the  United  States  Government  and  if  possible 
to  negotiate  a  treaty  in  which  American  rights  would  re- 
ceive recognition. 

The  Jay  Treaty.  Jaj-  succeeded  in  negotiating  a  treaty 
which    was    signed    November    19,    1794.     Great    Britain 


STRUGGLE  FOR  NEUTRALITY 


209 


agreed  to  give  up  the  western  posts  and  pay  for  the  prop- 
erty illegally  confiscated  during  the  preceding  two  years, 
while  the  United  States  was  to  settle  British  claims  arising 
from  American  debts  contracted  before  the  Revolution  and 
never  paid.  Great  Britain  refused  to  acknov/ledge  that 
food  and  provisions  were  not  contraband  of  war,  but 
agreed  that  in  case  of  their  seizure  as  contraband  they 
should  not  be  confiscated  but  taken  and  paid  for.  The 
question  of  impressment  was  not  mentioned  in  the  treaty 


John  Jay 

and  no  reference  was  made  to  the  "Rule  of  1756."  Great 
Britain  was  determined  to  suppress  direct  trade  in  neutral 
ships  between  the  French  colonies  and  Europe,  and  she 
also  desired  to  put  a  stop  to  the  practice  which  American 
shipowners  had  been  following  of  carrying  French  colonial 
products  to  the  United  States  for  reexportation  to  Europe. 
To  accomplish  this  purpose  a  bargain  was  placed  in  the 
twelfth  article  of  the  treaty  providing  that  for  the  dura- 
tion of  the  war  Great  Britain  would  admit  American 
vessels  of  seventy  tons  or  less  to  British  West  Indian  ports 


210  STRUGGLE  FOR  NEUTRALITY 

on  the  condition  that  no  vessel  of  the  United  States  should 
be  permitted  to  carry  molasses,  sugar,  coffee,  or  cotton 
"either  from  his  Majesty's  islands,  or  from  the  United 
States  to  any  part  of  the  world  except  the  United  States." 
The  Senate  indignantly  refused  to  ratify  this  article  of  the 
treaty.  It  is  difficult  to  understand  how  Jay  came  to  ne- 
gotiate such  an  agreement.  It  not  only  forbade  American 
ships  to  engage  in  the  reexportation  of  the  most  important 
West  Indian  products  to  Europe,  but  it  actually  forbade 
American  vessels  to  carry  American  cotton  to  Europe,  and 
cotton  was  fast  becoming  the  most  important  American 
export. 

The  Senate  ratified  the  treaty  with  the  exception  of  the 
twelfth  article,  but  the  treaty  was  highly  unpopular.  It 
pledged  Great  Britain  to  a  belated  recognition  of  a  few  of 
the  obvious  rights  of  the  United  States,  but  it  contained 
no  concession  with  respect  to  such  controversial  matters 
as  the  rights  of  enemy  property  on  neutral  ships ;  it  did  not 
bind  Great  Britain  to  give  up  the  practice  of  impressment ; 
and  it  did  not  open  the  ports  in  the  British  West  Indies 
to  American  ships.  For  a  few  years,  however,  British 
naval  vessels  virtually  ceased  their  depredations  on  Ameri- 
can commerce,  and  danger  of  war  with  Great  Britain  was 
for  the  time  being  averted. 

Trouble  with  France.  The  leaders  of  the  French  re- 
public were  greatly  angered  by  the  Jay  treaty.  French 
naval  commanders  redoubled  their  efforts  to  interfere  with 
American  trade  and  many  American  vessels  were  captured 
and  condemned  on  the  flimsiest  pretexts.  The  United 
States  protested  and  demanded  reparation ;  but  instead  of 
replying  to  the  demands  of  the  American  representatives 
sent  to  Paris,  French  agents  requested  large  bribes  before 
they  would  consent  to  the  opening  of  negotiations.  The 
American  representatives  indignantly  withdrew.  President 
Adams  laid  an  account  of  their  experiences  before  Congress, 


STRUGGLE  FOR  NEUTRALITY  211 

and  the  country  began  to  prepare  for  war  against  France. 
On  July  7,  1798  American  naval  vessels  were  authorized  to 
attack  French  cruisers.  About  this  time  Napoleon  assumed 
control  of  the  French  government.  He  was  not  desirous  of 
engaging  in  war  with  the  United  States,  and  at  his  request 
American  representatives  went  to  France  and  in  1800  ne- 
gotiated a  treaty  in  which  it  was  agreed  that  France  would 
thereafter  respect  the  rights  of  American  vessels. 

Growth  of  American  Commerce.  Even  in  the  midst  of 
the  controversies  with  France  and  Great  Britain  there  was 
a  steady  and  rapid  expansion  of  American  commerce.  The 
exports  of  domestic  products  declined  somewhat  after  1796, 
but  there  was  a  marked  advance  in  the  exports  of  foreign 
merchandise,  most  of  which  consisted  of  West  Indian 
products.  The  following  table  shows  the  development  of 
the  export  trade  and  the  growth  of  the  American  merchant 
marine  engaged  in  foreign  trade  from  1793  to  1802 : 


Tonnage  of  American 

Ships  Engaged  in 

Year 

Domestic  Exports 

Foreign  Exports 

Foreign  Trade 

1793 

$24,000,000 

$2,110,000 

367,734 

1794 

26,500,000 

6,526,000 

438,863 

1795 

39,500,000 

8,490,000 

529,471 

1796 

40,764,000 

26,300,000 

576,733 

1797 

29,850,000 

27,000,000 

597,777 

1798 

28,527,000 

33,000.000 

603,376 

1799 

33,142.000 

45,523,000 

657.142 

1800 

31,142,000 

39,130.000 

667,107 

1801 

47,473.000 

46,642,000 

630,-558 

1802 

36,708,000 

35,775,000 

557,760 

In  many  of  these  years  the  exports  of  foreign  products 
were  greater  in  value  than  the  exports  of  domestic  mer- 
chandise. This  reexport  trade  was  extremel}-  profitable  for 
American  shipping  and  mercantile  interests.  The  mer- 
chants and  shipowners  of  New  York  City  displayed  the 
greatest  activity  in  securing  this  lucrative  trade  for  their 
port.  Of  the  three  largest  cities  of  the  United  States, 
Boston,  New  York  and  Philadelphia,  New  York  was  most 


212     STRUGGLE  FOR  NEUTRALITY 

favorably  situated  to  handle  the  reexport  business,  being 
closer  than  Boston  to  the  West  Indies  and  not  a  river  port 
like  Philadelphia.  By  1800  New  York  had  a  commanding 
lead  among  American  seaports,  a  lead  which  the  city  has 
never  relinquished. 

The  Treaty  of  Amiens;  the  Renewal  of  the  War.  In 
March,  1802,  the  Treaty  of  Amiens  was  signed  and  Europe 
had  a  short  period  of  peace.  With  the  return  of  peace 
French  and  British  merchant  vessels  resumed  operations 
and  the  great  carrying  trade  of  American  shipowners 
quickly  declined.  For  the  year  ending  September  30,  1803, 
the  value  of  the  exports  of  foreign  goods  from  the  United 
States  was  only  $13,594,000,  a  little  more  than  one-third 
what  it  had  been  the  preceding  year.  Peace  in  Europe 
was,  however,  of  short  duration.  The  conflict  between 
England  and  France  was  resumed  in  May,  1803,  and  within 
a  short  time  almost  the  whole  of  Europe  was  again  involved 
in  war.  The  merchant  vessels  of  the  United  States  began 
once  more  to  gather  the  rewards  of  neutrality.  Exports  of 
foreign  merchandise  reached  the  high  total  of  $60,283,000 
in  1806,  and  the  American  merchant  fleet  engaged  in 
foreign  trade  grew  to  nearly-  800,000  tons. 

Suppression  of  the  Barbary  Pirates.  During  the  years 
of  expanding  commerce  following  1790,  the  United  States 
had  not  been  able  to  put  an  end  to  the  attacks  upon  Ameri- 
can vessels  by  the  Barbary  pirates.  Following  the  cus- 
tom of  European  nations,  the  Government  had  given  large 
bribes  to  the  rulers  of  Tripoli,  Algiers,  Tunis  and  ^Morocco 
to  secure  immunity  for  American  shipping,  but  each  pay- 
ment to  one  ruler  had  caused  the  others  to  make  new  de- 
mands. Eventually  American  patience  was  exhausted,  and 
in  1802  Congress  declared  war  on  Tripoli.  Energetic  ac- 
tion by  our  small  but  intrepid  navy  brought  all  the  robbers 
to  terms,  and  they  were  glad  to  agree — without  receiving 
any  bribes — to  let  American  ships  alone. 


STRUGGLE  FOR  NEUTRALITY  213 

Napoleon  and  England.  When  the  European  war  was 
resumed  in  1803  it  was  apparent  that  there  was  to  be  a 
struggle  to  the  finish  between  Napoleon  and  Great  Britain. 
Napoleon  had  become  master  of  France  and  he  was  ambi- 
tious to  control  all  of  Europe.  England  opposed  his  am- 
bition and  Napoleon  knew  that  his  dream  of  power  could 
never  be  realized  as  long  as  England  remained  uncon- 
quered.  The  British  government,  on  the  other  hand,  real- 
izing that  the  domination  of  Europe  by  Napoleon  would 
endanger  England,  knew  that  England  would  be  safe  only 
when  Napoleon's  power  was  completely  destroyed.  Both 
parties  to  the  struggle  were  willing  to  go  to  almost  any 
length  to  obtain  their  ends.  The  rights  of  neutrals  could 
be  given  scant  consideration.  Each  power  was  ready  to 
use  every  weapon  at  its  command. 

After  war  was  declared  Napoleon  assembled  a  great  army 
at  Boulogne,  with  the  intention  of  invading  England.  Had 
he  been  able  to  secure  control  of  the  English  Channel  for 
only  a  brief  time,  he  might  have  carried  out  his  design, 
but  his  fleet  was  blockaded  in  Cadiz  by  the  superior  forces 
of  the  British  navy.  When  Austria  and  Russia  joined 
with  Great  Britain  early  in  1805,  Napoleon  was  compelled 
for  the  time  being  to  abandon  his  plan  of  invading  England ; 
and  when  on  October  21,  his  fleet  was  destroyed  at  the  great 
battle  of  Trafalgar,  the  possibility  of  his  landing  a  French 
army  on  the  English  shore  forever  vanished. 

Napoleon  quickly  crushed  Austria,  the  campaign  cul- 
minating on  December  21,  1805,  with  the  French  victory 
at  Austerlitz.  Prussia  took  the  field  against  him  the  fol- 
lowing year,  but  her  military  power  was  crushed  at  Jena 
on  October  1,  1806.  The  following  spring  Napoleon  over- 
whelmed the  Russian  forces  at  Friedland.  He  had  con- 
quered a  peace  on  the  continent,  but  he  had  not  yet  sub- 
dued his  implacable  foe  across  the  English  Channel. 
England  could  not  meet  Napoleon  on  the  land ;  Napoleon 


214  STRUGGLE  FOR  NEUTRALITY 

could  not  cope  with  England  on  the  sea.  Each  was  de- 
sirous of  destroying  the  other.  Since  military  contest  was 
impossible,  both  resorted  to  economic  warfare.  Each  tried 
to  destroy  the  other's  commerce.  England  controlled  the 
sea  and  endeavored  to  prevent  ships  from  reaching  French 
ports ;  Napoleon  controlled  virtually  the  entire  continent  of 
Europe  and  he  tried  to  ruin  England  by  excluding  English 
goods  from  continental  markets. 

The  British  Orders  in  Council  and  Napoleon's  "De- 
crees." It  had  long  been  apparent  to  English  statesmen 
that  France  derived  much  strength  from  commerce  with 
neutral  nations,  and  it  was  decided  that  this  neutral  trade 
should  be  stopped.  The  best  expression  of  the  necessity 
for  this  action  was  given  in  a  remarkable  pamphlet  written 
by  James  Stephen,  a  member  of  the  House  of  Commons, 
and  published  in  1805  under  the  title.  War  in  Disguise;  or 
the  Frauds  of  Neutral  Flags.  Stephen  advocated  the  dis- 
continuance of  the  policy  followed  after  the  ratification  of 
the  Jay  treaty,  urging  the  application  of  the  "doctrine  of 
continuous  voyage"  with  respect  to  West  Indian  products 
reexported  from  the  United  States  to  Europe.  That  is,  this 
reexport  trade  should  be  subjected  to  the  "Rule  of  1756" 
just  as  if  the  voyage  from  the  West  Indies  to  Europe  had 
been  continuous.  British  admiralty  courts  were  already 
inclining  toward  this  interpretation  of  the  "Rule  of  1756," 
as  was  shown  in  the  condemnation  of  the  American  ship, 
Essex,  though  other  issues  were  involved  in  that  particular 
ease  which  would  have  led  to  the  condemnation  of  the  ship 
without  the  application  of  the  doctrine  of  continuous 
voyage. 

Great  Britain  not  only  decided  that  the  American  re- 
export trade  was  illegal,  but  she  took  other  measures  to 
destroy  French  trade.  On  May  16,  1806,  the  British  gov- 
ernment issued  Orders  in  Council  declaring  the  coast  of 
Europe  blockaded  from  the  mouth  of  the  Elbe  River  to 


STRUGGLE  FOR  NEUTRALITY  215 

the  port  of  Brest.  Thereafter  all  neutral  vessels  destined 
to  ports  along  that  part  of  the  European  coast,  if  captured 
by  British  vessels,  were  to  be  confiscated. 

Napoleon  began  his  attack  on  English  commerce  imme- 
diately after  he  Had  crushed  Austria  and  Prussia.  On  No- 
vember 21,  1806  he  issued,  from  the  captured  capital  of 
Prussia,  the  "Berlin  Decree,"  in  which  he  declared  the 
British  Isles  to  be  blockaded,  and  announced  the  novel 
doctrine  that  enemy  property  on  land  should  be  subject 
to  capture  and  confiscation. 

In  1807  Great  Britain  extended  her  commercial  warfare. 
Napoleon  had  subjugated  a  large  part  of  the  European 
continent.  British  merchants  were  suffering  heavy  losses 
because  of  the  exclusion  of  British  ships  from  continental 
ports  and  because  of  the  seizure  of  British  goods.  In  Janu- 
ary Orders  in  Council  were  published  declaring  it  to  be  il- 
legal for  a  neutral  vessel  to  engage  in  trade  between  ports 
unfriendly  to  Great  Britain ;  on  November  11  the  final 
step  was  taken  of  forbidding  neutral  vessels  to  enter  the 
ports  of  any  European  country  with  which  Great  Britain 
was  at  war  or  to  enter  ports  from  which  British  vessels 
were  excluded,  unless  such  neutral  vessels  should  first  touch 
at  a  British  port  and  obtain  permission  to  proceed. 

Napoleon  struck  back  December  17,  1807,  with  the 
"Milan  Decree"  in  which  he  declared  that  all  vessels  touch- 
ing at  British  ports  o-r  submitting  to  search  by  British 
naval  authorities  should  be  considered  "denationalized" 
and  subject  to  capture  and  confiscation  wherever  found. 
Napoleon  by  this  time  controlled  virtually  all  the  European 
coast  except  that  of  Russia  and  Turkey;  he  had  an  alliance 
with  the  Emperor  of  Russia,  who  had  agreed  to  enforce  the 
"continental  system"  against  England.  He  was  in  a  posi- 
tion to  destroy  English  commerce  if  he  could  but  hold 
firm. 

The  Policy  of  the  United  States.    When  it  was  heard 


216  STRUGGLE  FOR  NEUTRALITY 

in  the  United  States  that  Great  Britain  was  contemplating 
the  adoption  of  the  ''doctrine  of  continuous  voyage"  navi- 
gation and  mercantile  interests  were  deeply  concerned.  Ef- 
forts were  made  to  induce  Congress  to  bring  pressure  to 
bear  upon  Great  Britain  to  forego  any  change  in  her  former 
policy.  In  January,  1806  Andrew  Gregg  of  Pennsylvania 
introduced  a  resolution  in  the  House  of  Representatives 
designed  to  commit  Congress  to  the  enactment  of  a  non- 
importation law  against  Great  Britain.  John  Randolph  of 
Virginia  vigorously  opposed  the  resolution  and  warmly  de- 
fended Great  Britain's  attitude,  saying  "the  liberties  of 
the  human  race  are  threatened  by  a  single  power,  more  for- 
midable than  the  coalesced  world,  to  whose  utmost  ambition, 
vast  as  it  is,  the  naval  force  of  Great  Britain  forms  the  only 
obstacle."     The  resolution  was  not  passed. 

Had  Great  Britain  adopted  a  conciliatory  attitude  to- 
wards the  United  States  it  is  probable  that  she  could  have 
obtained  our  friendship  and  even  our  aid  against  the  auto- 
cratic Napoleon.  However,  Great  Britain  chose  to  be  offen- 
sive and  arrogant.  British  naval  vessels  were  stationed 
along  the  American  coast  to  stop  American  ships  and  im- 
press seamen.  On  April  18,  1806,  Congress  enacted  a  law 
which  provided  that  after  November  15,  no  manufactured 
goods  should  be  imported  from  Great  Britain  or  from 
British  colonies.  The  la%  was  in  effect  but  a  short  time 
when  it  was  suspended.  President  Jefferson  sent  James 
Monroe  to  London  early  in  the  year,  and  'Monroe  and 
William  Pinkney  negotiated  a  treaty  with  Great  Britain, 
obtaining  several  important  concessions.  The  treaty  as  a 
whole  was  unsatisfactory  to  Jefferson,  however,  and  he  re- 
fused to  submit  it  to  the  Senate  for  consideration.  On  June 
27,  1807,  the  United  States  was  subjected  to  insult  and  out- 
rage. As  the  American  frigate  Chesapeake  was  leaving  Nor- 
folk for  the  IMediterranean  it  was  attacked  and  seized  by  the 
British  frigate,  Leopard,  and  four  of  her  crew  carried 


STRUGGLE  FOR  NEUTRALITY  217 

away,  three  of  whom  were  American  citizens.  Even  after 
this  event  Jefferson  refused  to  counsel  war,  confining  his 
efforts  to  demanding  apologies  and  reparation,  and  warning 
all  armed  British  vessels  out  of  American  waters. 

When  the  Orders  in  Council  of  November  1807  and  the 
Milan  Decree  were  published,  American  shipping  interests 
were  placed  in  a  well-nigh  unbearable  situation.  If  a 
vessel  stopped  at  a  British  port  it  was  subject  to  cap- 
ture and  confiscation  in  any  port  of  the  European  conti- 
nent ;  if  it  endeavored  to  go  to  a  port  on  the  continent  with- 
out securing  permission  in  a  British  port  it  was  subject 
to  capture  and  confiscation  by  British  authority.  Napo- 
leon declared  it  illegal  for  neutrals  to  trade  with  Great 
Britain;  Great  Britain  declared  it  illegal  for  neutrals  to 
trade  directly  with  continental  ports. 

Embargo  and  Non-intercourse.  Though  realizing  that 
the  United  States  was  being  treated  in  a  humiliating 
fashion,  Jefferson  was  averse  to  going  to  war  with  either 
France  or  Great  Britain.  He  endeavored  to  gain  redress  by 
other  methods.  Upon  his  advice,  even  before  word  of  the 
Milan  Decree  had  been  received,  Congress  passed  on 
December  22,  1807,  the  Embargo  Act,  which  put  an  end  to 
all  foreign  commer'ce  of  the  United  States.  American  ves- 
sels were  forbidden  to  sail  for  foreign  ports,  and  foreign 
vessels  could  depart  from  the  United  States  only  in  ballast 
or  with  the  cargo  on  board  when  the  law  was  passed.  It 
was  thought  that  the  total  loss  of  American  commerce 
would  bring  the  French  and  British  governments  to  terms. 

Though  the  embargo  caused  serious  losses  in  England 
and  in  France,  it  produced  its  most  distressing  results  in 
the  United  States.  The  shipping  business  was  destroyed, 
sailors  were  thrown  out  of  employment,  prices  of  agricul- 
tural products  became  so  low  that  farmers  were  ruined. 
Efforts  to  evade  the  law  caused  the  enactment  of  repres- 
sive measures  which  created  violent  resentment.     In  New 


218     STRUGGLE  FOR  NEUTRALITY 

England,  where  the  shipping  and  mercantile  interests  were 
strongest,  the  dissatisfaction  with  Jefferson's  policy  was  so 
great  that  there  was  imminent  danger  of  disruption  of  the 
Union. 

Popular  disapproval  of  the  Embargo  Act  became  so 
great  that  on  March  1,  1809,  it  was  repealed  and  in  its  place 
was  substituted  the  Non-Intercourse  Act  which  forbade 
all  commercial  intercourse  with  France  and  Great  Britain 
and  their  possessions  but  restored  the  right  of  trade  with 
the  rest  of  the  world.  Under  this  law  commerce  revived. 
Little  attention  was  paid  to  the  fact  that  the  law  forbade 
trade  with  France  and  England,  and  American  merchants 
traded  regularly,  either  directly  or  indirectly,  with  both 
these  countries.  Napoleon  insulted  the  United  States  in 
March,  1810,  by  confiscating  all  American  vessels  then  in 
French  harbors  on  the  pretext  that  he  wanted  to  help 
our  Government  enforce  its  non-intercourse  law.  This 
piece  of  hypocritical  thievery  brought  several  hundred 
thousand  dollars  into  his  treasury. 

Efforts  to  induce  Great  Britain  aiid  France  to  withdraw 
their  orders  and  decrees  were  without  satisfactory  result. 
Finally  on  INIay  1,  1810,  Congress  adopted  a  new  plan,  en- 
acting the  "Macon  Bill  No.  2,"  which  repealed  the  Non- 
Intercourse  Act  but  provided  that  if  either  France  or 
Great  Britain  should  withdraw  her  edicts,  and  if  the  other 
nation  should  not  take  similar  action  within  three  months, 
then  the  Non-Intercourse  Act  wauld  be  revived  against  the 
nation  refusing  to  revoke  its  objectionable  orders.  Again 
Great  Britain  refused  the  opportunity  to  obtain  the  friend- 
ship and  support  of  the  United  States.  Napoleon  informed 
President  Madison  that  after  November  1  the  Berlin  and 
Milan  Decrees  would  not  be  enforced  against  the  United 
States,  provided  the  United  States  should  cause  Great 
Britain  to  respect  American  rights.  Ignoring  the  condi- 
tional nature  of  Napoleon's  offer  Madison  issued  a  procla- 


STRUGGLE  FOR  NEUTRALITY  219 

mation  on  November  2,  stating  that  the  Berlin  and  Milan 
Decrees  had  been  revoked.  England  refused  to  recall  her 
Orders  in  Council  on  the  ground  that  Napoleon's  revoca- 
tion of  his  decrees  applied  only  to  the  United  States  and 
not  to  all  neutral  nations.  In  December  Napoleon  took  ad- 
vantage of  the  fact  that  his  offer  to  withdraw  the  decrees 
had  been  conditional,  and  on  the  pretext  that  the  United 
States  had  failed  to  obtain  the  repeal  of  the  British  Orders 
in  Council,  he  confiscated  about  ten  million  dollars'  worth 
of  American  ships  and  cargoes  in  French  ports.  His  offer 
had  been  merely  a  trick  to  make  further  robbery  possible. 

The  New  Congress.  In  November,  1811,  a  new  Congress 
assembled  in  Washington.  It  was  composed  largely  of 
vigorous  young  men,  who  were  intensely  American  in  their 
views  and  who,  unlike  the  statesmen  hitherto  in  control 
of  the  political  destinies  of  the  United  States,  had  had 
little  or  no  foreign  experience.  They  were  American  by 
birth,  training  and  education,  and  they  were  ready  to  pro- 
tect American  rights.  It  would  have  been  much  better 
had  they  arrived  on  the  scene  somewhat  earlier.  Among 
these  men  were  Henry  Clay,  who  was  elected  Speaker  of 
the  House  of  Representatives  though  serving  his  first  term 
in  that  body,  John  C.  Calhoun,  Langdon  Cheves,  and  Wil- 
liam Lowndes.  These  rising  political  leaders  of  the  South 
and  West  were  tired  of  the  dilatory  policies  of  Jefferson 
and  Madison,  and  they  insisted  upon  action.  The  griev- 
ances of  the  United  States  against  both  France  and  Eng- 
land were  sufficient  to  justify  war.  England  was  chosen 
as  the  opponent  chiefly  because  it  was  possible  to  fight  Eng- 
land both  on  the  sea  and  in  Canada.  Waging  war  on 
France  would  have  been  a  difficult  matter.  As  it  turned 
out  the  opportune  time  for  declaring  war  on  either  France 
or  England  had  passed. 

The  Failure  of  the  ' '  Continental  System. ' '  Napoleon 's 
''continental  system"  was  a  powerful  weapon,  but  he  was 


220  STRUGGLE  FOR  NEUTRALITY 

unable  to  enforce  it  long  enough  to  destroy  England. 
English  manufactures  had  long  been  widely  used  on  the 
European  continent  and  people  were  unwilling  to  do  with- 
out them.  Even  Napoleon  managed  to  buy  material  for 
soldiers'  uniforms  from  English  sources.  From  Turkish 
ports  and  from  the  small  island  of  Heligoland  large  quanti- 
ties of  English  goods  were  smuggled  into  Europe.  English 
vessels  carried  forged  American  registers  to  gain  admis- 
sion to  ports  which  English  ships  were  forbidden  to  enter. 

Even  with  these  violations  of  the  continental  system 
Napoleon  might  have  succeeded  in  ruining  English  in- 
dustry had  he  been  able  to  keep  the  friendship  of  his 
continental  allies.  The  Spanish  people  rose  against  him, 
however,  and  in  1811  his  most  powerful  ally,  Alexander  of 
Russia,  turned  against  him  and  refused  longer  to  support 
the  continental  system.  It  was  obvious  that  Napoleon's 
power  was  beginning  to  crumble.  In  1812  his  armies  were 
overwhelmed  in  the  disastrous  Russian  campaign. 

When  Napoleon's  power  began  to  wane,  Great  Britain 
became  willing  to  promote  friendly  relations  with  the 
United  States.  She  offered  reparation  for  the  "Leopard- 
Chesapeake  affair,"  and  finally  on  June  16,  1812,  she 
withdrew  the  Orders  in  Council  against  which  the  United 
States  had  been  so  long  protesting.  Unfortunately  there 
were  no  transatlantic  cables  or  wireless  telegraphy  in  those 
days ;  it  usually  took  six  weeks  for  news  to  be  carried  across 
the  ocean.  Two  days  after  the  Orders  in  Council  were 
revoked  Congress  declared  war. 

The  War  of  1812.  Coming  when  it  did,  the  War  of 
1812  was  an  unfortunate  occurrence.  It  began  after  the 
causes  for  it  had  virtually  disappeared ;  it  was  so  unpopu- 
lar in  New  England  that  it  almost  led  to  secession ;  it 
caused  enormous  commercial  losses;  it  was  conducted  with 
such  incompetence  as  to  cause  much  unnecessary  loss,  dis- 
tress and  humiliation ;  its  only  great  battle  on  land,  that 


STRUGGLE  FOR  NEUTRALITY  221 

of  New  Orleans,  was  fought  after  the  treaty  of  peace  had 
been  signed;  and  finally,  the  treaty  made  no  reference 
to  the  issues  which  had  been  the  fundamental  cause  of 
trouble — the  rights  of  neutral  nations  in  time  of  war. 

A  century  later  we  were  to  learn  again  that  a  general 
European  conflict  inevitably  results  in  interference  with 
apparently  established  rights  of  neutrals,  and  that  we  can- 
not help  becoming  entangled  in  such  a  conflict;  that  the 
wise  course  is  to  base  the  choice  of  sides  upon  the  moral 
issues  involved  in  the  struggle,  without  too  much  insistence 
upon  commercial  rights,  which  signify  but  little  when  the 
** liberties  of  the  human  race"  are  at  stake. 

Questions  and  Topics 

1.  Do  you  think  America  should  have  helped  France  in 
1793  or  remained  neutral?     Why? 

2.  In  what  sense  did  the  Neutrality  Proclamation  become 
a  part  of  the  permanent  policy  of  the  United  States? 

3.  Compare  the  commercial  rights  of  neutral  nations  in 
1800  with  those  of  the  present  day. 

4.  Why  may  the  war  of  1812  be  called  a  war  of  com- 
mercial origin? 

5.  What  is  the  importance  of  foreign  trade  to  any 
country  at  war? 

6.  Compare  the  causes  and  effects  of  the  embargo  act 
with  the  non-importation  agreements  of  the  colonists. 


CHAPTER  XII 
INTERNAL  CONDITIONS,  1795-1819 

Agriculture  and  Foreign  Trade  the  Chief  Economic 
interests  Before  1807.  Until  1807,  when  the  Embargo 
Act  was  passed,  agriculture  and  foreign  trade  were  the 
most  important  branches  of  economic  activity  in  the  United 
States.  Foreign  markets  for  agricultural  products  were 
good  because  of  the  war  in  Europe,  and  the  shipping  and 
shipbuilding  industries  gave  abundant  opportunity  for  the 
investment  of  surplus  capital.  The  New  England  fisheries 
continued  to  grow,  but  the  time  was  at  hand  when  the  fish- 
ing industry  could  no  longer  be  considered  of  great  im- 
portance in  comparison  with  the  expanding  industries  on 
land. 

Exports  of  grain  and  flour  increased  in  volume.  Cotton 
culture  in  the  South  was  steadily  extended,  the  total  pro- 
duction of  cotton  rising  from  8,000,000  pounds  in  179.5  to 
80,000,000  pounds  in  1807.  A  few  important  improve- 
ments were  made  in  agricultural  implements.  Thomas 
Jefferson  designed  a  mold-board  for  plows  which  would 
give  a  minimum  of  resistance  when  the  plow  passed 
through  the  earth.  In  1797  Charles  Newbold  of  New 
Jersey  took  out  a  patent  on  an  iron  plow,  but  it  was  sev- 
eral years  before  plows  of  iron  came  into  general  use,  the 
farmers  claiming  that  the  metal  poisoned  the  soil.  Other 
inventions  of  this  period  were  the  cradle  for  cutting  grain 
and  the  fanning-mill  for  use  in  separating  threshed  grain 
from  chaff. 

Emigration  to  the  West;  Public  Lands  Policy. 
Though  the  prosperity  of  farmers  in  the  East  tended  to 
check  emigration  to  the  West,  the  love  of  adventure  and 

222 


NATIONAL  GROWTH  1795-1819  223 

the  desire  for  greater  opportunity  tempted  many  people 
to  try  their  lot  on  the  frontier.  The  opening  of  the  Mis- 
sissippi River  in  1795  gave  Western  farmers  easy  access  to 
a  market  and  they  became  more  prosperous  and  contented. 
The  population  of  Kentucky  increased  from  73,677  in  1790 
to  220,955  in  1800,  while  that  of  Tennessee  advanced  from 
35,061  to  105,602  in  the  same  period.  The  growth  of  popu- 
lation in  the  Northwest  Territory  was  not  rapid  before 
1800  because  the  government  did  not  sell  land  in  smaller 
tracts  than  640  acres,  and  the  prices  of  Federal  lands  were 
somewhat  higher  than  the  prices  charged  in  Kentucky  and 
Tennessee  and  in  Eastern  States  which  had  "back  lands" 
to  sell.  In  ^lay,  1800,  Congress  enacted  a  law  permitting 
the  sale  of  lands  on  the  instalment  plan,  at  a  minimum 
price  of  two  dollars  an  acre,  in  tracts  as  small  as  320  acres. 
This  law,  especially  because  of  the  credit  feature,  stimu- 
lated settlement.  In  1803  the  State  of  Ohio  was  admitted 
to  the  Union,  the  first  of  the  "not  less  than  three  nor  more 
than  five  States"  promised  in  the  Ordinance  of  1787.  In 
1804  Congress  made  a  further  concession  to  prospective 
settlers  by  authorizing  the  sale  of  tracts  of  land  as  small 
as  160  acres. 

Commerce  of  the  West.  The  settlement  of  the  West 
was  accompanied  by  an  expansion  of  internal  trade.  After 
the  Whisky  Rebellion  man}-  Western  farmers  turned  to 
raising  hogs  and  cattle.  Large  corn  crops  and  an 
abundance  of  mast  in  the  forests  made  stock  raising  a 
profitable  business.  Live  stock  furnished  its  own  trans- 
portation to  market.  Large  droves  of  hogs  and  cattle  were 
driven  across  the  mountains  to  Philadelphia  and  Balti- 
more, to  be  slaughtered  for  the  foreign  and  domestic  provi- 
sion trade.  The  chief  outlet  for  Western  produce,  how- 
ever, was  the  ^Mississippi  River.  Flatboats  loaded  with 
wheat,  corn,  oats,  flour,  bacon,  lard,  whisky,  tobacco 
and  other  farm  products  floated  down  to  New  Orleans  in 


224 


NATIONAL  GROWTH  1795-1819 


increasing  numbers  each  year.  Little  effort  was  made  to 
send  shipments  up  the  river.  Since  it  took  thirty  men 
more  than  three  months  to  work  a  loaded  flatboat  from 
New  Orleans  to  the  mouth  of  the  Ohio  River  it  was  cheaper 
for  the  Western  farmers  to  obtain  their  cloth,  shoes,  tools, 
and  hardware  overland  from  Eastern  cities.  Though  the 
roads  across  the  mountains  were  poor,  large  ''Conestoga'' 
wagons,  drawn  by  ten  horses  and  capable  of  carrying  two 
or  three  tons,  regularly  took  loads  of  merchandise  from 
Philadelphia,  New  York  and  Baltimore  to  Pittsburgh,  the 
''Gateway  of  the  West,"  to  be  distributed  by  boat  among 


\\,fO'.-/~^- 


Flat-boat  on  the  Mississippi 

the  settlements  down  the  river.  Pittsburgh,  by  1800,  was  a 
thriving  manufacturing  center  with  furnaces  and  mills 
working  up  the  iron  deposits  discovered  in  nearby  valleys 
into  nails,  kettles,  and  other  kinds  of  ironware,  and  with 
boat-yards  constructing  flatboats  and  barges  to  be  sold  to 
emigrants  on  their  way  to  the  Western  lands.  As  early 
as  1794  a  regular  passenger  service  was  established  between 
Pittsburgh  and  Cincinnati  on  "bullet-proof"  keel-boats, 
armed  with  one-pounder  guns  for  defense  against  In- 
dians. 

The  Mississippi  Closed;  the  Purchase  of  Louisiana.    In 
October,  1802,  without  any  warning  whatever,  the  Spanish 


NATIONAL  GROWTH  1795-1819  225 

Intendant  of  Louisiana  announced  that  the  Mississippi 
River  was  closed  to  American  commerce.  He  refused  to 
permit  the  flatboat  owners  from  the  United  States  to  exer- 
cise the  "right  of  deposit"  at  New  Orleans,  and,  contrary 
to  the  provisions  of  the  treaty  of  1795,  he  did  not  assign 
another  place  on  the  banks  of  the  river  where  this  right 
might  be  exercised.  The  enraged  Western  farmers  threat- 
ened to  send  an  armed  expedition  to  capture  New  Orleans. 
Trouble  was  averted  when  the  Spanish  government  dis- 
avowed the  action  of  the  Intendant  and  ordered  him  to 
restore  the  privileges  which  he  had  taken  away. 

President    Jefferson   was    greatly    disturbed    when    the 
river    was    closed.     In    1800    Spain    ceded    Louisiana    to 
Napoleon,    but   the   French    did   not   take    charge    of   the 
province.     When  Jefferson  first  learned  of  the  cession,  he 
expressed  the  fear  that  French  occupation  of  New  Orleans 
would  give  rise  to  trouble.     Desirous  of  avoiding  all  diffi- 
culties, he  sent  James  ]\Ionroe  to  France  to  negotiate  for 
the  purchase  of  New  Orleans,  and  the  French  territorj^ 
east  of  the  Mississippi.     Napoleon  was  preparing  to  renew 
his  contest  with  England ;  he  needed  money,  and  he  felt 
sure  that  if  he  retained  Louisiana,  England  would  take 
the    province    from    him.     He   offered   to    sell   the    entire 
Louisiana  province  to  the  United  States  for  $15,000,000 
and  his  offer  was  accepted.     Jefferson  had  not  only  secured 
undisputed  control  of  the  Mississippi,  but  he  had  almost 
doubled  the  territory  of  the  United  States.     In  1804  two 
exploring  expeditions   penetrated   the  new  territory,   one 
led  by  Meriwether  Lewis  and  William  Clark,  and  the  other 
by   Zebulon   M.    Pike.     The    leaders   of    both    expeditions 
brought   back  interesting   accounts   of  the   regions  which 
they  explored,  but  their  stories  received  little  attention. 
Nobody  dreamed  that  it  would  be  possible  to  settle  and 
develop   the   great  territory   beyond   the   ^Mississippi.     At 
best  it  could  be  used  as  a  reservation  for  Indian  tribes 


226  NATIONAL  GROWTH  1795-1819 

which  it  might  be  necessary  to  remove  from-  the  North- 
west Territory. 

The  Transportation  Problem.  The  problem  of  obtain- 
ing better  means  of  transportation  became  more  pressing 
as  the  settlement  of  the  West  continued.  Private  capital- 
ists were  not  willing  to  undertake  the  work  of  constructing 
long  highways  to  the  West.  It  was  suggested  that  the  Fed- 
eral government  should  undertake  to  build  an  improved 
road  across  the  mountains.  In  1802  when  Congress  enacted 
a  law  providing  for  the  admission  of  Ohio  to  the  Union 
it  stipulated  that  one  twentieth  of  the  revenues  obtained 
from  the  sale  of  public  land  in  Ohio  should  be  used  to  con- 
struct a  road  leading  "to  and  through"  the  State.  It 
was  decided  that  the  road  should  begin  at  Cumberland, 
Maryland,  and  following  for  part  of  the  way  the  path  of 
Braddock's  Road,  extend  to  Wheeling,  Virginia.  The  first 
contract  for  construction  of  this  highway  was  let  in  1807 ; 
the  road  was  opened  to  Wheeling  in  1818. 

Congress  was  desirous  of  doing  more  than  constructing 
a  road  to  the  Ohio  River.  It  wanted  to  undertake  a  com- 
plete program  of  internal  improvements.  On  March  2, 
1807,  the  Senate  adopted  a  resolution  requesting  Albert 
Gallatin,  the  Secretary  of  the  Treasury,  to  place  before  the 
Senate  what  information  he  could  obtain  concerning  the 
conditions  of  transportation  in  the  United  States  and  the 
needs  for  the  future.  In  an  elaborate  report  submitted  the 
following  year,  Gallatin  described  the  transportation 
facilities  of  the  United  States  and  outlined  a  comprehen- 
sive plan  of  improvement.  He  calculated  the  cost  of  the 
various  projects  which  he  thought  desirable  and  recom- 
mended that  the  Federal  Government  bear  a  large  part 
of  the  construction  expense.  By  the  time  the  report  was 
submitted  the  Embargo  Act  had  caused  such  a  diminu- 
tion of  Federal  revenue  that  there  were  no  funds  in  the 
Treasury;   the   country   was  deeply   involved   in   the   dis- 


NATIONAL  GROWTH  1795-1819  227 

pute  with  France  and  England  over  neutral  rights;  and 
nothing  could  be  done  for  the  time  being  to  follow  out 
Gallatin 's  suggestions. 

The  Steamboat.  While  the  transportation  problem  was 
being  widely  studied  and  discussed,  Robert  Fulton  of  New 
York  built  the  Clermont,  the  first  successful  steamboat. 
Inventors  had  been  striving  for  several  years  to  use  the 
power  of  the  steam  engine  to  drive  a  boat  through  the 


Robert  Fulton 

water,  and  though  several  had  met  with  a  considerable 
degree  of  success,  none  had  been  able  to  produce  a  steam- 
boat that  was  commercially  practicable.  Fulton  solved  the 
problem.  In  August,  1807,  his  boat  steamed  up  the  Hud- 
son from  New  York  to  Albany  in  thirty-two  hours.  The 
advantages  of  the  new  means  of  transportation  were  per- 
ceived at  once,  and  in  a  short  time  steamboats  were  oper- 
ated on  several  eastern  rivers.  In  1811,  Fulton  built  a 
steamboat  for  use  on  the  Ohio  River.     It  was  thought  at 


228 


NATIONAL  GROWTH  1795-1819 


first  that  a  steamboat  could  not  be  built  to  stem  the  power- 
ful current  of  the  Mississippi,  yet  it  was  only  six  years 
after  the  first  steamboat  appeared  on  the  Ohio  that  one 
was  built  which  successfully  made  a  trip  from  New  Orleans 
to  Louisville.  Steam  transportation  by  water  was  a  com- 
plete success;  and  inventors  were  at  work  on  a  device  for 
steam  transportation  by  land,  a  problem  which  was  of 
greater  difficulty. 

The  Rise  of  Manufacturing.  While  foreign  trade  and 
agriculture  were  prospering  so  greatly  the  people  of  the 
United  States  devoted  comparatively  little  attention  to 
manufacturing.     Though  Slater's  mill  at  Pawtucket  con- 


The  Clermont 

tinned  in  successful  operation,  only  three  additional  cotton 
mills  were  established  before  1805.  The  people  depended 
chiefly  upon  England  for  their  manufactured  goods  just  as 
the  people  of  the  colonial  days  had  done.  In  1807  the 
embargo  suddenly  brought  foreign  commerce  to  an  end. 
Since  it  was  no  longer  possible  to  obtain  English  textiles 
and  other  manufactured  supplies  there  was  an  immediate 
expansion  of  manufacturing  in  this  country.  A  period  of 
progress  began  which  lasted  until  after  the  war  of  1812. 
During  the  first  year  of  the  embargo  a  dozen  new  mills 
were  erected  for  the  spinning  of  cotton  j'arn.  In  1811 
American  cotton  mills,  with  a  total  of  80,000  spindles, 
used  10,000  bales  of  raw  cotton.     In  1815  the  number  of 


NATIONAL  GROWTH  1795-1819 


229 


spindles  in  American  cotton  factories  was  500,000  and  the 
amount  of  raw  cotton  converted  into  yarn  was  90,000  bales. 
The  machinery  in  most  of  these  early  cotton  mills  was 
crude,  and  the  yarn  which  they  produced  served  to  make 
only  coarse  fabrics.  Weaving  was  done  entirely  on  hand- 
looms  until  1814  when  Francis  C.  Lowell  introduced  the 
power-loom.  His  factory  at  Waltham,  ]\Iassachusetts,  was 
the  first  in  which  the  various  processes  of  carding,  rov- 


Fraiicis  C.  Lowell 

ing,  spinning  and  weaving  were  carried  on  under  the  same 
roof.  As  in  the  English  cotton  mills  more  than  three- 
fourths  of  the  workers  in  the  early  American  factories 
were  women  and  children.  Water-power  was  generally 
used  to  drive  the  machinery,  though  after  1810  a  few  mills 
were  equipped  with  steam  engines. 

The  manufacture  of  woolens  also  became  a  factory  in- 
dustry of  some  importance  during  this  period  in  a  few 


230  NATIONAL  GROWTH  1795-1819 

New  England  towns.  Iron  manufactures  too  had  a  period 
of  great  prosperity,  eastern  and  western  Pennsylvania  be- 
coming the  chief  centers  of  production  of  pig  iron  as  well 
as  of  finished  articles  of  iron.  A  noteworthy  achievement 
of  this  time  was  the  first  successful  use  of  anthracite  coal 
as  fuel.  Some  "stone  coal"  was  brought  to  Philadelphia 
from  the  Lehigh  Valley  in  1803,  but  nobody  could  get  it 
to  burn.  By  1812  the  process  of  making  a  fire  on  iron 
gratings,  which  made  possible  a  strong  draft,  was  worked 
out,  and  anthracite  began  to  be  used  both  for  manufactur- 
ing and  for  household  purposes.  It  could  not  compete 
extensively  with  wood,  however,  until  means  of  cheap 
transportation  from  the  sources  of  supply  were  provided. 

In  1809  Albert  Gallatin  made  a  report  upon  the  manu- 
facturing industries  of  the  United  States,  estimating  the 
value  of  the  annual  products  of  manufactures  to  be  $120,- 
000,000.  He  named  a  number  of  articles,  such  as  leather, 
soap,  candles,  refined  sugar,  coarse  earthenware  and  choco- 
late which  were  being  produced  in  sufficient  quantities  to 
meet  the  needs  of  the  country ;  and  he  gave  a  list  of  manu- 
facturing enterprises  which  wer.e  firmly  established  but 
not  yet  sufficiently  developed  to  supply  the  wants  of  the 
people,  the  most  important  products  of  this  class  of  in- 
dustries being  ironware,  paper,  glass,  gunpowder,  hats, 
liquors,  and  textiles  of  cotton,  wool,  hemp  and  flax. 

Many  of  the  new  manufacturing  enterprises  were  owned 
by  corporations  instead  of  by  individuals  or  by  partners. 
In  banking  and  in  turnpike  construction  the  corporation 
had  shown  its  usefulness  by  making  it  possible  to  assemble 
the  investment  funds  of  many  individuals  to  be  used  for 
a  single  purpose.  Such  an  effective  institution  was  of 
great  help  in  starting  manufacturing  enterprises  for  which 
fairly  large  sums  of  money  were  needed  for  the  construc- 
tion of  buildings,  the  purchase  of  machinery  and  the  pay- 
ment of  wages  during  the  early  stages  of  production. 


NATIONAL  GROWTH  1795-1819  231 

End  of  the  First  United  States  Bank;  Financial  Diffi- 
culties. The  charter  of  the  United  States  Bank,  granted 
by  Congress  in  1791,  had  a  time  limit  of  twenty  years. 
In  1810  the  question  of  renewing  the  charter  arose  in 
Congress.  The  Bank  had  been  a  highly  successful  busi- 
ness enterprise,  and  it  had  been  of  great  service  to  the 
Government  and  to  private  business.  However  the  con- 
servative methods  of  the  Bank's  directors  had  prevented 
speculative  activities  by  many  State  bank  managers,  who 
now  brought  all  their  influence  to  bear  upon  Congress  to 
defeat  the  bill  for  a  new  charter.  Albert  Gallatin,  the 
Secretary  of  the  Treasury,  was  strongly  in  favor  of  grant- 
ing a  new  charter  and  he  advised  Congress  that  the  Govern- 
ment could  not  well  do  without  the  Bank's  services.  By 
a  close  vote  the  bill  for  a  new  charter  was  lost,  and  in 
1811  the  Bank  wound  up  its  affairs. 

The  Bank  had  always  redeemed  its  notes  promptly  in 
specie  and  by  refusing  to  accept  the  notes  of  non-specie- 
paying  banks,  it  had  forced  the  State  banks  to  be  cautious 
in  making  loans  and  issuing  notes.  As  soon  as  the  Bank 
passed  out  of  existence  a  large  number  of  new  State  banks 
were  organized.  With  no  check  of  any  kind  upon  their 
activities  they  began  to  make  extensive  loans  to  speculators, 
and  within  a  short  time  there  was  a  large  expansion  of 
the  bank-note  currency  of  the  country.  Most  of  the  new 
currency  was  issued  in  the  West  and  South  where  the  de- 
velopment of  new  resources  tended  to  excite  a  spirit  of 
speculation.  The  excessive  issues  of  banknotes  began  about 
the  time  the  United  States  declared  war  upon  Great 
Britain,  weakening  the  currency  of  the  nation  at  a  most 
inopportune  time. 

During  the  early  part  of  the  war  all  of  the  American 
coast  except  that  of  New  England  was  blockaded  by  the 
British  navy,  and  the  people  of  the  South  and  West  turned 
to  New  England  merchants  for  all  foreign  goods.     When 


232  NATIONAL  GROWTH  1795-1819 

the  blockade  was  later  extended  to  include  the  New  Eng- 
land coast,  the  manufacturers  of  New  England  did  their 
best  to  supply  to  the  South  and  West  the  articles 
usually  obtained  from  Europe.  As  a  result  of  this 
commerce  virtually  all  the  specie  of  the  country  soon 
found  its  way  to  New  England.  In  1814  all  the  banks  out- 
side of  New  England  declared  a  suspension  of  specie  pay- 
ments, that  is,  they  announced  that  they  would  no  longer 
redeem  their  notes  in  coin.  This  removed  all  restrictions 
on  the  issue  of  bank-notes  and  dozens  of  new  banks  were 
organized  to  add  to  the  quantity  of  paper  money.  People 
feared  that  the  bank-notes  would  never  be  redeemed,  and 
their  loss  of  confidence  was  soon  reflected  in  a  depreciation 
of  the  paper  currency.  The  value  of  any  bank-note  de- 
pended entirely  upon  the  confidence  of  the  people  in  the 
ability  of  the  issuing  bank  ultimately  to  redeem  it. 

Meanwhile  the  sharp  reduction  in  foreign  imports  had 
almost  deprived  the  Government  of  its  only  important 
source  of  revenue.  Instead  of  adopting  a  resolute  policy 
of  internal  taxation  Congress  decided  to  depend  chiefly 
upon  loans  to  pay  the  cost  of  the  war.  Without  a  satis- 
factory program  of  taxation  to  support  Government  credit 
the  Treasury  found  it  impossible  to  sell  bonds  at  par. 
Nearly  all  the  New  Englanders,  strongly  opposed  to  the 
war  and  on  the  verge  of  secession,  refused  to  lend  money 
to  the  Government  on  any  terms.  The  Treasury  issued 
notes,  some  of  which  were  of  such  small  denomination  that 
they  could  be  used  as  currency.  They  were  not  legal 
tender,  but  had  the  war  continued  much  longer  there  is 
little  doubt  that  Congress  would  have  authorized  the  issue 
of  legal-tender  paper  money.  The  Treasury  accepted  de- 
preciated bank-notes  at  par  in  payment  for  bonds,  there- 
by becoming  a  partner  in  the  issue  of  unredeemable  paper. 
This  practice  added  millions  of  dollars  to  the  cost  of  the 
war.     When  hostilities  finally  ended  the  currency  was  in 


NATIONAL  GROWTH  1795-1819  233 

a  deplorable  state  in  all  sections  of  the  country  except 
New  England  where  the  banks  had  succeeded  in  maintain- 
ing specie  payments.  The  New  England  bankers  had  not 
issued  an  excessive  amount  of  notes  themselves  and  they 
had  refused  to  receive  the  notes  of  non-specie-paying  banks 
of  other  sections  of  the  country.  When  commerce  was  re- 
stored after  the  war  the  Government  accepted  the  de- 
preciated bank-notes  in  payment  of  import  duties,  a  prac- 
tice which  caused  imports  to  enter  the  country  at  Phila- 
delphia, Baltimore  and  Southern  ports  where  the  deprecia- 
tion of  the  currency  was  greatest.  As  one  historian  ex- 
pressed it,  ' '  The  New  Englanders  were  punished  for  being 
honest;  and  those  places  in  which  swindling  was  carried 
on  to  the  greatest  extent,  and  the  greatest  depreciation 
of  the  currency  produced,  obtained,  as  a  reward  for  their 
villainy  a  monopoly  of  foreign  trade." 

Economic  Lessons  of  the  War.  The  war  of  1812  served 
to  emphasize  the  fact  that  the  United  States  was  dependent 
upon  foreign  trade  for  economic  prosperity.  Farmers  and 
planters  lost  their  markets  during  the  war  with  England ; 
people  suffered  because  they  could  not  obtain  the  articles 
which  they  customarily  imported  from  Europe.  Manu- 
facturing industries  prospered  but  they  could  not  develop 
rapidl}^  enough  during  the  short  period  of  the  war  to  sup- 
ply the  needs  of  the  whole  country,  and  even  if  the  factories 
could  have  been  built  and  the  machinery  provided,  the 
lack  of  adequate  means  of  internal  transportation  would 
have  prevented  the  assembling  of  raw  materials  and  the 
distribution  of  finished  products.  While  the  war  was  in 
progress  the  coastwise  trade  was  virtually  suspended  be- 
cause of  the  British  blockade,  and  nearly  all  domestic 
trade  had  to  be  carried  on  by  means  of  wagons. 

It  was  plain  to  everybody  that  war  with  a  power  having 
greater  strength  upon  the  sea  than  the  United  States 
would  always  result  in  such  hardships  as  were  experienced 


234  NATIONAL  GROWTH  1795-1819 

during  the  war  of  1812,  unless  preventive  measures  of 
some  kind  were  taken.  The  United  States  must  have  a 
navy  strong  enough  to  control  the  sea  and  keep  the  road 
to  foreign  markets  open,  or  the  people  must  try  to  produce 
for  themselves  a  larger  portion  of  those  things  which  they 
had  been  accustomed  to  obtain  from  foreign  lands.  The 
political  leaders  of  the  time  determined  that  Congress 
should  enact  legislation  which  would  give  greater  economic 
strength  to  the  nation.  Their  program  was  designed  to 
foster  and  encourage  all  varieties  of  business  activity  in 
the  United  States. 

The  Tariff  of  1816.  One  of  the  first  things  which  was 
determined  upon  was  the  enactment  of  a  protective  tariff 
law.  The  encouragement  of  manufactures  would.  Presi- 
dent .Madison  declared,  "relieve  the  United  States  from 
a  dependence  on  foreign  supplies,  ever  subject  to  casual 
failure,  for  articles  necessary  for  the  public  defense  or 
connected  with  the  primary  wants  of  individuals."  Alex- 
ander Dallas,  the  Secretary -of  the  Treasury,  was  unre- 
servedly in  favor  of  protection.  In  a  report  to  Congress  he 
divided  American  industries  into  three  classes;  first,  those 
which  were  developed  sufficiently  to  meet  the  needs  of  the 
people ;  second,  those  which  were  not  yet  able  to  supply  the 
home  demand  but  with  a  little  encouragement  would  soon  be 
able  to  do  so;  third,  those,  in  which  there  was,  for  the 
time  being,  little  prospect  of  extensive  growth  because 
of  the  lack  of  expert  labor  and  proper  machinery.  The 
leading  products  of  the  indu.stries  of  the  first  class  were 
carriages,  cabinet  wares,  cordage,  firearms,  hats,  boots  and 
shoes;  of  the  industries  of  the  second  class,  cotton  and 
woolen  textiles  of  the  coarser  grades,  liquors,  manufac- 
tures of  iron,  brass  and  tin ;  of  the  industries  of  the  third 
class,  hardware,  cutlery,  porcelain,  high-grade  textiles  of 
cotton,  wool,  silk  and  linen,  carpets  and  hosiery.  For  the 
first    group    of    articles    Secretary    Dallas    recommended 


NATIONAL  GROWTH  1795-1819  235 

prohibitive  duties  which  would  exclude  all  foreign  com- 
petition, asserting  that  competition  among  domestic  pro- 
ducers would  keep  prices  down  to  a  proper  level ;  for  the 
second  group  he  advised  high  duties,  which  would  en- 
courage American  manufactures  but  would  not  exclude  all 
foreign  competition ;  for  the  third  group  he  suggested  that 
duties  be  adjusted  according  to  the  needs  of  the  Govern- 
ment for  revenue. 

The  shipping  interests  of  New  England  and  the  Middle 
Atlantic  States  were  strongly  opposed  to  the  protection  of 
manufactures  because  they  feared  it  could  cause  a  reduc- 
tion of  foreign  trade  and  injure  their  business.  The  man- 
ufacturing interests  favored  protection  because  they  could 
not  pay  the  high  rate  of  wages  prevalent  in  America  and 
compete  with  foreign  producers  without  the  aid  of  a  high 
tariff.  The  planters  of  the  South  were  opposed  to  pro- 
tection because  it  would  compel  them  to  pay  higher  prices 
for  manufactured  goods.  The  grain  raising  farmers 
realized  that  protection  would  make  the  prices  of  manu- 
factured goods  higher,  but  they  did  not  have  as  certain  a 
foreign  market  for  grain  as  the  Southern  planters  had 
for  cotton  and  tobacco,  and  consequently  they  favored  pro- 
tection on  the  ground  that  the  development  of  manufac- 
turing industries  would  give  them  a  larger  and  more  cer- 
tain market  for  grain  and  provisions. 

In  1816  the  division  of  these  various  interests  on  the 
tariff  question  was  not  so  pronounced  as  it  was  later. 
The  effects  of  the  recent  war  were  fresh  in  the  minds  of 
everybody.  Even  the  Southern  planters  knew  that  the 
cheapness  of  foreign  manufactures  was  of  no  advantage 
when  war  interrupted  foreign  trade.  They  remembered 
that  the  war  had  deprived  them  of  a  market  for  cotton 
and  felt  that  it  might  be  wise  to  have  a  domestic  market 
to  rely  upon  in  case  of  another  war.  The  tariff  bill  of 
1816  was  introduced  bv  William  Lowndes  of  South  Caro- 


236  NATIONAL  GROWTH  1795-1819 

lina,  and  John  C.  Calhoun,  who  later  became  an  uncom- 
promising opponent  of  protection,  led  the  fight  for  its 
enactment.     In  a  speech  defending  the  tariff  bill  he  said: 

''We  cannot  be  indifferent  to  dangers  from  abroad, 
unless,  indeed,  the  House  is  prepared  to  indulge  in  the 
phantom  of  eternal  peace.  ...  It  must  ever  be  consid- 
ered the  plain  dictate  of  wisdom  in  peace  to  prepare  for 
war.  What,  then,  let  us  consider,  constitute  the  re- 
sources of  this  country,  and  what  are  the  effects  of  war 
upon  them?  Commerce  and  agriculture,  till  lately  al- 
most the  only,  still  constitute  the  principal,  sources  of 
our  wealth.  So  long  as  these  remain  uninterrupted, 
the  country  prospers;  but  war,  as  we  are  now  circum- 
stanced, is  equally  destructive  to  both.  They  both  de- 
pend on  foreign  markets;  and  our  country  is  placed, 
as  regards  them,  in  a  situation  strictly  insular;  a  wide 
ocean  rolls  between.  Our  commerce  neither  is  nor  can 
be  protected  by  the  present  means  of  the  country. 
What,  then,  are  the  effects  of  a  war  with  a  maritime 
power — with  England?  Our  commerce  annihilated, 
spreading  individual  misery  and  producing  national 
poverty ;  our  agriculture  cut  off  from  its  accustomed 
markets,  the  surplus  products  of  the  farmer  perishes 
on  his  hands  and  he  ceases  to  produce  because  he 
can  not  sell.  .  .  .  The  recent  war  fell  with  peculiar 
pressure  on  the  growers  of  cotton  and  tobacco,  and 
other  staples  of  the  country ;  and  the  same  state  of 
things  will  recur  in  the  event  of  another,  unless  pre- 
vented by  the  foresight  of  this  body.  .  .  .  When  our 
manufactures  are  grown  to  a  certain  perfection,  as  they 
soon  will  be  under  the  fostering  care  of  Government, 
we  will  no  longer  experience  these  evils.  The  farmer 
will  find  a  ready  market  for  his  surplus  produce,  and 
what  is  almost  of  equal  consequence,  a  certain  and  cheap 
supply  of  all  his  wants.  ...  To  give  perfection  to  this 
state  of  things  it  will  be  necessary  to  add,  as  soon  as 
possible  a  system  of  internal  improvements,  and  at  least 
such  an  extension  of  our  navy  as  will  prevent  the  cut- 
ting off  our  coasting  trade. ' ' 

A  third  of  the   Southern  representatives  in   Congress 


NATIONAL  GROWTH  1795-1819  237 

voted  for  the  bill,  and  a  majority  of  the  representatives 
from  New  England  supported  it.  Eight  years  later  when 
the  memories  of  war  had  faded  and  the  House  seemed 
willing  to  "indulge  in  the  phantom  of  eternal  peace"  the 
sacrifice  of  selfish  interest  for  the  sake  of  national  strength 
in  time  of  war  was  a  forgotten  ideal.  The  tariff  law,  as 
finally  passed,  placed  duties  ranging  from  7.5  per  cent 
to  30  per  cent  ad  valorem  on  a  large  number  of  manu- 
factured articles.  Coarse  cotton  fabrics  were  given  special 
protection  by  the  requirement  that  a  minimum  valuation 
of  twenty-five  cents  a  yard  be  set  upon  all  imported  cot- 
tons. A  specific  duty  of  forty-five  cents  a  hundred- 
weight was  placed  upon  hammered  iron  and  $1.50  a  hun- 
dredweight on  rolled  iron.  The  duties  on  iron  were  in- 
creased in  1818  because  of  Swedish  and  English  competi- 
tion. 

The  Second  United  States  Bank.  Another  important 
step  which  Congress  took  in  the  interest  of  business 
stability  was  the  chartering  of  the  second  United  States 
Bank  in  1816.  The  excesses  of  the  State  banks  in  issuing 
notes  and  the  need  of  the  Government  for  a  reliable  fiscal 
agency  were  the  chief  reasons  for  creating  another  Bank. 
Calhoun  supported  the  project,  and  so  did  Henry  Clay, 
who  in  1811  had  been  a  leading  opponent  of  the  renewal 
of  the  charter  of  the  first  Bank.  The  act  creating  the 
new  Bank  authorized  a  capitalization  of  $35,000,000,  one- 
fifth  of  which  was  to  be  subscribed  by  the  Government. 
Of  the  stock  allotted  to  the  public  one-fourth  was  to  be 
paid  for  in  specie  and  three-fourths  in  Government  bonds. 
The  President  of  the  United  States  appointed  five  of  the 
twenty-five  directors.  The  charter  ran  for  twenty  years, 
and  the  obligations  and  privileges  of  the  Bank  were  similar 
to  those  of  the  first  Bank.  The  main  Bank  opened  at  Phil- 
adelphia in  Januar}',  1817,  and  twenty-five  branches  were 
established  in  other  cities. 


238  NATIONAL  GROWTH  1795-1819 

Internal  Improvements.  Congress  was  desirous  of 
undertaking  a  system  of  internal  improvements  at  Fed- 
eral expense  such  as  had  been  suggested  by  Gallatin  in 
1808,  and  as  a  beginning,  a  bill  was  passed  in  1817  provid- 
ing that  the  profits  of  the  Government  from  the  United 
States  Bank  should  be  set  aside  to  constitute  a  fund  for 
constructing  roads  and  improving  rivers.  President  Madi- 
son, though  protesting  a  firm  belief  in  the  policy  of  con- 
structing internal  improvements  at  Federal  expense, 
vetoed  this  bill  on  the  grounds  that  Congress  had  no  power 
under  the  Constitution  to  build  roads  or  waterways  with- 
in the  States.  He  had  suggested  on  several  previous  oc- 
casions that  the  Constitution  be  amended  to  give  Con- 
gress the  power  which  it  lacked  in  this  particular,  and 
in  his  veto  message  of  1817  he  renewed  this  suggestion. 

Madison's  action  was  a  great  disappointment  to  those 
who  were  anxious  for  the  Federal  Government  to  lead  the 
way  in  promoting  the  economic  development  of  the  country. 
There  were  many  projects  of  highway  and  canal  construc- 
tion for  which  Federal  aid  was  earnestly  desired.  "With 
the  prospect  of  help  from  the  National  Treasury  darkened, 
State  Governments  and  private  capitalists  began  to  under- 
take the  responsibility  of  financing  certain  internal  im- 
provements. The  most  notable  work  undertaken  at  this 
time  was  the  Erie  Canal. 

White  settlers  had  gradually  pushed  across  the  State  of 
New  York  until  the  line  of  settlements  reached  Lake  Erie. 
The  inhabitants  of  the  western  part  of  New  York  were 
most  unfavorably  situated.  They  were  far  from  markets 
and  their  facilities  for  transportation  were  not  so  good 
even  as  those  of  the  settlers  of  the  Ohio  Valley,  who  had 
an  outlet  by  way  of  the  Mississippi.  The  war  of  1812,  by 
interrupting  the  small  commerce  between  western  New 
York  and  Montreal,  had  emphasized  the  need  for  better 
transportation  facilities  between  the  lake  districts  and  the 


NATIONAL  GROWTH  1795-1819  239 

Hudson  River.  In  1817,  under  the  energetic  leadership  of 
DeWitt  Clinton,  the  people  of  New  York  began  the  con- 
struction of  a  barge  canal  between  Albany  and  Buffalo. 

The  Navigation  Act  of  1817.  While  Congress  seemed 
to  emphasize  the  need  of  encouraging  internal  develop- 
ment rather  than  foreign  commerce  it  nevertheless  showed 
a  disposition  to  aid  the  shipping  business,  which  after 
the  war  was  much  in  need  of  help.  The  end  of  the  Na- 
poleonic wars  had  released  a  large  tonnage  of  European 
shipping  for  commercial  service,  and  American  shipowners, 
who  for  several  years  before  the  war  of  1812  had  en- 
joyed a  virtual  monopoly  of  the  carrying  trade  of  a  large 
part  of  the  world,  now  found  that  the  field  was  full  of 
active  and  energetic  competitors. 

By  this  time  it  was  perceived  that  discriminating  tariff 
and  tonnage  duties  were  of  little  advantage  to  shipping 
because  foreign  countries  invariably  discriminated  against 
American  ships  to  the  same  extent  that  the  United  States 
discriminated  against  foreign  ships.  Accordingly  in  1815 
Congress  enacted  a  law  providing  for  the  repeal  of  all 
discriminating  duties  against  the  vessels  of  those  countries 
which  would  abandon  the  policy  of  discrimination  against 
American  ships.  The  policy  of  discrimination  was 
abandoned  however  only  in  the  "direct  trade";  that  is, 
the  United  States  continued  to  levy  discriminating  duties 
against  a  vessel  bringing  goods  from  another  country  than 
the  one  to  which  the  vessel  belonged.  Great  Britain 
soon  accepted  the  terms  of  the  act,  and  the  discriminating 
duties  imposed  by  each  country  on  the  vessels  of  the  other 
were  repealed. 

The  chief  handicap  affecting  American  shipping  was  the 
navigation  laws  of  European  nations.  The  British  law 
of  1660  was  still  in  force,  which  permitted  goods  to  be 
imported  into  Great  Britain  only  in  British  ships  or  in 
ships  of  the  country  from  which  the  goods  were  derived. 


240  NATIONAL  GROWTH  1795-1819 

American  vessels  were  not  permitted  to  carry  goods  from 
South  America  or  from  any  European  country  to  Great 
Britain  but  only  goods  from  the  United  States.  Virtu- 
ally all  European  countries  had  laws  similar  to  that  of 
Great  Britain.  The  United  States  before  1817  had  no  such 
law.  British  vessels  could  bring  French  or  Spanish  or 
Dutch  goods  to  the  ports  of  the  United  States  as  freely 
as  American  vessels  could  do  so,  with  the  exception  that 
American  ships  paid  lower  tonnage  and  tariff  duties. 

In  1817  Congress  passed  a  navigation  act  for  the  protec- 
tion of  American  shipping.  This  law  did  not  go  so  far 
as  the  European  navigation  laws.  It  stipulated  that  all 
goods  imported  into  the  United  States  should  be  carried 
in  American  vessels  or  in  the  vessels  of  the  country  from 
which  the  goods  were  derived,  but  provided  that  th,e 
prohibition  should  not  apply  to  the  vessels  of  those 
countries  which  did  not  have  similar  laws.  That  is,  if 
Great  Britain  would  permit  American  ships  to  carry  goods 
from  a  foreign  country,  such  as  France  or  Spain,  to  Great 
Britain,  then  the  United  States  would  permit  British  ves- 
sels to  bring  other  than  British  products  to  the  United 
States.  By  this  law  it  was  hoped  to  force  foreign 
countries  to  admit  American  ships  to  their  indirect  trade 
and  give  American  shipowners  an  equal  chance  in  the 
world's  carrying  trade.  If  foreign  countries  persisted  in 
excluding  American  ships,  the  United  States  would  fol- 
low the  same  policy  with  respect  to  foreign  ships.  The 
law  also  provided  that  foreign  ships  should  be  entirely  ex- 
cluded from  the  coasting  trade  of  the  United  States,  re- 
serving this  commerce  solely  for  American  ships. 

Great  Britain  accepted  the  terms  of  the  act  of  1817 
with  respect  to  the  trade  of  the  British  Isles,  but  refused 
to  admit  American  vessels  to  the  British  possessions  in 
the  West  Indies.  One  purpose  of  the  law  of  1817  was  to 
induce  Great  Britain  to  open  her  West  Indian  ports  to 


NATIONAL  GROWTH  1795-1819  241 

American  ships,  and  when  this  was  not  done  Congress 
promptly  passed  an  act  in  1818  forbidding  British  ships 
to  trade  between  the  United  States  and  British  colonies 
in  America.  This  law  put  an  end  to  trade  between  the 
colonies  and  the  United  States  because  under  the  British 
law  only  British  ships  could  engage  in  this  commerce. 
The  controversy  thus  begun  lasted  for  twelve  years,  during 
which  time  commerce  was  frequently  interrupted,  but  the 
matter  was  finally  adjusted  in  1830  when  Great  Britain 
gave  way  and  granted  the  demand  of  the  United  States 
that  American  ships  be  permitted  to  trade  with  the  British 
colonies.  By  a  policy  of  retaliation  the  United  States 
compelled  the  destruction  of  the  old  European  system  of 
navigation  laws. 

Business  Activity  Following  the  War  of  1812.  A  war 
usually  causes  severe  restriction  of  many  branches  of  in- 
dustrial activity,  and  the  years  immediately  following  the 
close  of  a  war  usually  witness  a  lively  reaction.  The 
war  of  1812  was  no  exception.  Commerce  and  agriculture 
suffered  a  great  decline  while  the  war  was  in  progress,  and 
as  soon  as  the  war  ended  a  period  of  intense  activity  began 
in  both  these  branches  of  industry. 

The  first  evidence  of  reaction  was  an  enormous  increase 
in  imports,  particularly  from  Great  Britain.  British 
manufacturers  had  long  been  excluded  from  many  markets 
in  Europe  and  America,  and  they  had  large  stocks  of 
goods  on  hand,  much  of  which  was  loaded  on  ships  be- 
fore the  treaty  of  peace  was  ratified,  waiting  so  to  speak 
for  a  signal  to  start  for  the  ports  of  the  United  States. 
In  the  fiscal  year  ending  September  30,  1815,  the  imports 
of  the  United  States  had  a  value  of  $113,000,000  and  the 
following  year  a  value  of  $147,000,000.  The  enormous 
sales  of  English  goods  in  this  country  were  due  primarily 
to  the  wish  of  English  dealers  to  dispose  of  accumulated 
stocks.     There  was  a  desire  on  the  part  of  English  political 


242  NATIONAL  GROWTH  1795-1819 

leaders  also  to  ruin  the  new  manufacturing  industries  of 
the  United  States.  Lord  Brougham  said  "it  was  well 
worth  while  to  incur  a  loss  upon  the  first  exportations, 
in  order  by  the  glut,  to  stifle  in  the  cradle  those  rising 
manufactures  in  the  United  States  which  the  war  had 
forced  into  existence  contrary  to  the  natural  course  of 
things."  America  was  still  regarded,  from  an  economic 
standpoint,  as  a  British  colony.  Large  quantities  of  Eng- 
lish manufactured  goods  were  "dumped"  upon  American 
markets,  in  spite  of  high  tariff  duties,  and  sold  at  auction 
at  ridiculously  low  prices.  Under  such  competition  nearly 
all  the  new  cotton  and  woolen  mills  were  soon  forced  to 
shut  down,  and  the  iron  manufacturers  along  the  Atlantic 
coast  likewise  closed  their  plants.  Only  the  high  costs  of 
transportation  from  the  seaboard  to  the  Ohio  Valley  saved 
the  mill  owners  of  the  West  from  immediate  ruin. 

The  plight  of  the  manufacturers  was  for  the  time  being 
lost  sight  of,  so  great  was  the  prosperity  of  agriculture  and 
trade.  Owners  of  English  cotton  mills  were  clamoring  for 
raw  material  and  the  price  of  American  cotton  soared. 
Previous  to  the  war  the  only  important  centers  of  cotton 
production  had  been  the  coastal  plain  and  upland  districts 
of  the  Carolinas  and  Georgia.  It  was  soon  found  that  the 
rich  bottom-lands  in  the  river  valleys  of  the  Mississippi 
territory  and  Louisiana  produced  a  better  grade  of  cotton 
than  the  uplands  of  the  coast  States.  The  center  of  cotton 
culture  shifted  rapidl}^  westward.  In  1816  and  1817  the 
Federal  Government  sold  more  than  a  million  acres  of  land 
in  the  Mississippi  territory. 

The  planters  of  the  South  devoted  their  energies  largely 
to  the  production  of  cotton,  relying  upon  the  farmers  of 
the  West  for  provisions  and  live  stock.  Shipments  down 
the  Mississippi,  interrupted  during  the  war  by  the  British 
attack  on  New  Orleans,  attained  a  greater  volume  than 
ever   before.     Steamboats   were   a    great   aid   to   Western 


NATIONAL  GROWTH  1795-1819 


243 


commerce.  They  did  not  at  once  displace  the  flatboat  in 
transporting  farm  produce  down  the  ^Mississippi,  but  they 
began  to  carry  a  part  of  the  traffic,  and  they  afforded  a 
cheap  and  convenient  means  for  the  flatboat  owners  to  re- 
turn to  their  homes.  The  prosperity  of  the  Western  farm- 
ers brought  about  the  sale  of  large  quantities  of  public 
land  in  southern  Ohio,  Indiana  and  Illinois  and  even  across 
the  Mississippi  in  the  Missouri  territory.  Speculators 
bought  large  tracts — usually  with  money  borrowed  from 


Early  Steamboat  on  the  Ohio  River 

banks — and  sold  out  at  higher  prices  to  incoming  settlers. 
Emigrants  from  Europe  flocked  to  the  fertile  western  val- 
leys; farmers  left  the  worn  out  lands  of  the  East  for 
the  better  soil  available  in  the  West;  many  inhabitants  of 
Kentucky  and  Tennessee  left  those  States  for  the  better 
lands  to  be  found  both  north  and  south.  In  1816  Thomas 
Lincoln  and  his  family,  including  his  seven  year  old  son 
Abraham,  moved  from  Kentucky  to  what  he  thought  was 
a  better  location  in  southern  Indiana. 


244 


NATIONAL  GROWTH  1795-1819 


The  cities  and  towns  on  the  Ohio  River — Pittsburgh, 
Marietta,  Cincinnati,  and  Louisville — prospered  and  in- 
creased rapidh^  in  population.  During  this  time  the 
custom  of  driving  hogs  across  the  mountains  to  Eastern 
markets  began  to  slacken,  and  a  great  pork-packing  busi- 
ness grew  up  in  the  Ohio  Valley.  Cincinnati,  the  chief 
center  of  the  industry  for  a  half-century,  was  known  be- 
fore 1820  as  the  ' '  Porkopolis  "  of  the  United  States.  Since 
beef  was  consumed  chiefly  as  fresh  meat,  the  large  trade 
in  cattle  did  not  diminish,  and  until  the  railroads  came 


Cincinnati  in  1810 

great  herds  of  cattle  were  driven  each  year  to  the  Eastern 
markets. 

As  the  Western  farmers  and  Southern  planters  enlarged 
their  production  of  grain,  live  stock  and  cotton,  they  in- 
creased their  purchases  from  Eastern  merchants.  A  large 
part  of  the  foreign  imports  which  entered  the  country^ 
just  after  the  war  was  sold  in  the  South  and  West.  The 
coasting  trade  between  Northern  and  Southern  seaports 
flourished,  and  there  was  a  marked  increase  of  the  wagon 
trade    across    the    Appalachian    mountains.     An    English 


NATIONAL  GROWTH  1795-1819  245 

traveler  reported  that  12,000  wagons  went  from  Philadel- 
phia and  Baltimore  to  Pittsburgh  in  1817,  carrying  mer- 
chandise upon  which  the  freight  charges  alone  were  £300,- 
000.  The  opening  of  the  Cumberland  Road  in  1818  gave 
Wheeling  an  opportunity  to  share  the  eastern  wagon  trade 
with  Pittsburgh.  From  these  cities  flatboat  stores  floated 
down  the  Ohio  and  the  Mississippi,  the  owners  peddling 
boots  and  shoes,  clothing,  furniture,  household  utensils, 
hardware,  all  kinds  of  agricultural  implements,  tobacco, 
liquor,  and  groceries  from  village  to  village  and  planta- 
tion to  plantation. 

The  Panic  of  1819.  The  ''good  times"  came  to  an  end 
in  1819,  when  a  disastrous  financial  crisis,  similar  to  that 
of  1785-86,  overtook  the  country.  There  were  many  causes 
which  contributed  to  the  collapse,  but  the  chief  one  was 
the  over-expansion  of  credit.  The  exports  of  the  United 
States  after  the  war  were  not  nearly  so  great  in  value  as 
the  imports,  and  even  when  nearly  all  the  specie  of  the 
country  was  shipped  abroad  the  importers  were  still  heavily 
in  debt.  Great  quantities  of  imported  goods  were  sold 
on  credit.  Bank-notes  were  issued  in  large  amounts  to 
facilitate  this  commerce  as  well  as  to  make  loans  to  in- 
dividuals engaged  in  speculative  enterprises.  As  long  as 
production  was  expanding  and  confidence  in  the  currency 
was  maintained  there  was  but  little  danger.  But  the 
bankers  made  many  loans  to  further  enterprises  which 
were  not  productive.  This  practice  weakened  the  cur- 
rency ;  other  things  happened  to  injure  credit. 

One  cause  of  disturbance  was  the  attempt  of  the  new 
United  States  Bank  to  hasten  the  restoration  of  specie 
payments  throughout  the  country.  The  directors  of  the 
Bank  made  the  attempt  not  so  much  because  they  had 
the  good  of  the  country  at  heart  as  because  they  wanted 
to  obtain  a  monopoly  of  the  banking  business  by  bringing 
ruin  to  their  competitors.     They  did  not  comply  with  the 


246  NATIONAL  GROWTH  1795-1819 

terms  of  their  charter  before  opening  the  Bank  in  1817, 
and  they  so  mismanaged  their  business  the  first  year  that 
the  Baltimore  branch  of  the  Bank  failed  in  1818  for  $3,- 
000,000.  Their  method  of  assaulting  the  credit  of  the 
State  banks  was  to  accumulate  a  quantity  of  the  notes  of 
a  particular  bank  and  present  them  suddenly  for  redemp- 
tion. This  policy  forced  the  State  banks  to  contract  their 
loans,  which  in  turn  compelled  individuals  who  had  bor- 
rowed from  the  banks  to  ask  their  debtors  for  money. 
Farmers  who  owed  merchants  or  who  had  mortgaged  their 
farms  to  bankers  to  secure  money  to  buy  land  or  equip- 
ment were  compelled  to  put  their  property  on  the  market 
for  sale.  Speculators  likewise,  who  still  held  large  tracts 
of  land  for  a  rise  of  prices,  were  compelled  to  sacrifice 
their  holdings.  Many  individuals  had  invested  borrowed 
funds  in  the  stock  of  manufacturing  and  turnpike  com- 
panies and  since  they  could  get  nothing  for  the  stock  they 
could  not  pay  their  debts  at  all.  General  liquidation 
brought  about  a  disastrous  fall  in  prices.  Farmers,  mer- 
chants and  bankers  were  ruined  in  large  numbers;  a  large 
part  of  the  bank-note  currency  of  the  country  became 
worthless.  To  make  matters  worse  the  export  price  of 
cotton,  the  great  "money  crop"  of  the  country,  fell  from 
thirty-two  cents  a  pound  in  1818  to  eighteen  cents  in  1820, 
and  the  planters  too  were  unable  to  meet  their  debts. 
Business  came  almost  to  a  standstill,  and  thousands  of 
people  were  bankrupt. 

The  End  of  an  Economic  Period.  The  crisis  of  1819 
marks  the  end  of  a  distinct  period  in  the  economic  and 
political  history  of  the  United  States.  Up  to  this  time  the 
new  nation,  though  politically  independent,  had  been 
nevertheless  little  more  than  an  economic  appendage  of 
the  British  Empire.  Problems  of  domestic  development 
had  been  subordinated  in  political  thought  to  questions 


NATIONAL  GROWTH  1795-1819  247 

involving  the  foreign  relations  of  the  country.  The 
economic  activity  of  greatest  public  concern  had  been  the 
foreign  trade. 

There  were  signs  that  the  old  order  of  things  was  pass- 
ing away.  The  legislation  following  the  war  of  1812  in- 
dicated the  coming  of  a  change,  though  this  legislation 
was  based  upon  the  fear  of  war  rather  than  upon  a  con- 
scious desire  to  shape  a  new  domestic  policy  for  the  United 
States.  Notwithstanding  this  legislation  business  easily  re- 
verted to  the  conditions  which  had  existed  before  the  war. 
But  nevertheless  the  old  order  was  passing;  domestic  prob- 
lems were  coming  to  the  front.  For  a  time  the  people 
floundered  to  get  their  bearings.  In  the  election  of  1820 
President  Monroe  carried  every  State  in  the  Union.  The 
old  issues,  upon  which  previous  elections  had  been  bitterly 
contested,  were  dead ;  as  yet  new  issues  and  new  policies 
had  not  been  definitely  formulated.  In  1824  no  candidate 
for  President  was  able  to  secure  a  majority  of  the  electoral 
votes  and  for  a  second  time  the  House  of  Representatives 
chose  a  President.  Their  choice  was  not  however  the 
choice  of  the  people.  He  was  the  last  President  of  the 
old  school,  a  great  man,  out  of  tune  with  the  times,  a 
somewhat  pathetic  relic  of  a  bygone  age. 

After  1819  the  people  of  the  United  States  definitely  set 
their  faces  toward  the  West.  Their  great  problem  was  the 
occupation  and  conquest  of  a  wide,  rich  belt  of  the  North 
American  continent.  We  shall  try  to  see  how  they  ac- 
complished their  task. 

Questions  and  Topics 

1.  Show  the  truthfulness  of  the  phrase  "Necessity  is  the 
mother  of  invention,"  in  connection  with  the  transporta- 
tion facilities  of  the  United  States  before  1819. 

2.  Make  a  parallel  list  of  the  objections  to  and  the 
benefits  of  the  factory  system. 


248  NATIONAL  GROWTH  1795-1819 

3.  In  what  respects  did  the  experiences  of  the  Govern- 
ment in  the  prosecution  of  the  War  of  1812  resemble  those 
of  the  Revolution? 

4.  Why  is  there  danger  of  a  panic  succeeding  the  period 
of  prosperity  that  comes  after  a  war? 

5.  Why  do  you  think  the  War  of  1812  has  sometimes 
been  called  the  "second  war  of  independence"? 


PART  IV 
THE  AMERICAN  SYSTEM 


CHAPTER  XIII 
PROTECTIVE  TARIFFS 

The  Spirit  of  Nationalism.  The  period  of  American 
history  beginning  about  1820  was  marked  by  the  rise  of  a 
spirit  of  intense  nationalism.  The  people  were  fast  learn- 
ing that  their  paramount  political  and  economic  problems 
were  internal  and  not  external  and  that  their  chief  inter- 
ests were  on  the  western  side  of  the  Atlantic  rather  than 
the  eastern.  The  decade  from  1820  to  1830  was  singularly 
full  of  occurrences  which  indicated  that  the  nation  had 
come  to  realize  the  new  state  of  affairs.  President  Mon- 
roe 's  message  to  Congress  in  1823  declared  ' '  that  the  Ameri- 
can continents,  by  the  free  and  independent  condition  which 
they  have  assumed  and  maintain,  are  henceforth  not  to  be 
considered  as  subjects  for  future  colonization  by  any  Euro- 
pean powers."  America  henceforth  wanted  to  be  free  from 
external  interference.  Congress  enacted  laws  to  promote 
the  development  of  "home"  industries.  The  problem  of 
constructing  a  system  of  transportation  facilities  to  bind  the 
different  sections  of  the  country  together  was  attacked  with 
a  spirit  of  earnest  determination.  The  enactment  of  the 
Missouri  Compromise  signalized  the  beginning  to  the  great 
political  struggle  in  which  the  occupation  and  settlement  of 
the  West  was  to  embroil  the  nation,  creating  differences 
which  were  to  culminate  in  civil  warfare. 

Recovery  from  the  Crisis  of  1819.  The  severe  indus- 
trial and  commercial  depression  which  came  with  the  finan- 
cial panic  of  1819  lasted  for  more  than  two  years. 
Time  was  necessary  for  the  payment  of  debt,  the  re- 
adjustment    of     prices     and     the     stabilization     of     the 

251 


252  PROTECTIVE  TARIFFS 

currency.  After  the  panic  there  was  a  substantial  de- 
cline of  imports  and  a  slight  increase  of  exports,  re- 
sulting in  a  liquidation  of  foreign  indebtedness.  Con- 
gress passed  "relief  acts"  for  the  benefit  of  the  purchasers 
of  public  lands  in  the  South  and  West  who  had  been  unable 
to  pay  their  instalments,  granting  an  extension  of  time  or 
permitting  them  to  surrender  a  portion  of  their  lands. 
The  management  of  the  United  States  Bank  was  changed 
and  under  the  wise  policy  of  the  new  president  the  disor- 
dered currency  was  restored  to  a  sound  condition.  Produc- 
tion gradually  became  normal.  English  manufacturers 
abandoned  the  habit  of  "dumping"  goods  on  the  American 
market  at  a  loss,  once  their  surplus  stocks  were  exhausted, 
and  under  the  protection  afforded  by  the  tariff  of  1816 
the  manufacturers  of  the  United  States  were  able  to  resume 
operation.  By  1823  all  the  textile  mills  that  had  been 
forced  to  close  were  again  working,  and  many  new  mills 
were  being  constructed.  The  demand  for  American  cotton 
goods  was  greater  than  the  manufacturers  could  meet ;  the 
woolen  manufacturers  were  importing  raw  wool  to  keep 
their  spindles  and  looms  busy.  The  wagon  trade  from 
Eastern  cities  to  Wheeling  and  Pittsburgh  was  once  more 
active,  and  the  traffic  on  the  Mississippi  River  was  larger 
than  ever  before. 

Distress  of  Grain  Farmers.  Though  production  and 
trade  gradually  recovered  during  the  three  years  following 
the  panic  of  1819,  the  farmers  of  the  Middle  Atlantic  and 
Western  States,  who  were  engaged  primarily  in  raising 
grain  and  live  stock,  were  not  so  prosperous  as  the  manu- 
facturers and  cotton  planters.  The  fertile  soil  of  the 
Ohio  Valley  was  yielding  a  product  considerably  in  excess 
of  the  demand.  The  production  of  grain  in  the  United 
States  had  increased  more  than  six-fold  since  1790,  yet  the 
annual  exports  were  but  little  greater  than  the  average 
exports  for  the  five  years  ending  with  1795.     The  farmers 


PROTECTIVE  TARIFFS  253 

of  the  West  in  particular  were  in  distressing  circumstances. 
The  costs  of  transportation  to  Eastern  markets  were  large 
whether  their  products  were  hauled  overland  or  taken  by 
water  by  way  of  New  Orleans.  The  Southern  planters 
took  a  substantial  amount  of  Western  produce  but  they 
were  able  to  absorb  only  a  small  fraction  of  the  total  quan- 
tity seeking  a  market.  In  1824  corn  could  be  bought  in 
Cincinnati  for  8  cents  a  bushel,  wheat  for  25  cents  a 
bushel,  and  flour  for  $1.25  a  barrel.  Many  farmers  let 
their  corn  and  wheat  rot  in  the  fields. 

Henry  Clay  and  the  American  System.  The  distress  of 
the  grain  producers  could  be  relieved  either  by  their  ob- 
taining a  larger  market  or  by  a  reduction  of  the  crops  of 
grain.  A  foreign  market  was  not  available.  Though  the 
people  of  the  United  States  consumed  each  year  large  quan- 
tities of  English  manufactured  goods  England's  Corn  Laws 
forbade  the  importation  of  American  grain.  The  farming 
interests  urged  that  since  there  was  no  foreign  market  for 
American  grain  it  was  the  duty  of  Congress  to  enact  legis- 
lation which  would  result  in  the  creation  of  a  "home 
market. ' '  If  England  would  not  buy  the  food  products  of 
the  United  States,  the  American  people  must  refuse  to 
purchase  manufactured  goods  from  England.  They  must 
establish  manufacturing  industries,  which  would  give  rise 
to  a  non-agricultural  population  that  would  consume  the 
excessive  supplies  of  meat  and  grain.  Congress  should 
establish  a  high  protective  tariff  which  would  encourage  the 
investment  of  capital  in  manufacturing  enterprises.  This 
was  the  "American  System"  of  which  Henry  Clay  was  the 
foremost  advocate. 

In  a  speech  in  support  of  a  new  tariff  bill  Clay  said: 
"Our  agricultural  is  our  greatest  interest.  .  .  .  We 
must  speedily  adopt  a  genuine  American  policy.  Still 
cherishing  the  foreign  market,  let  us  also  create  a  home 
market,  to  give  further  scope  to  the  consumption  of  the 


254  PROTECTIVE  TARIFFS 

produce  of  American  industry,  .  .  .  Let  us  suppose  that 
half  a  million  persons  are  now  employed  abroad  in  fab- 
ricating for  our  consumption  those  articles  of  which  by 
the  operation  of  this  bill,  a  supply  is  intended  to  be 
provided  within  ourselves.  That  half  a  million  per- 
sons are,  in  effect,  subsisted  by  us ;  but  their  actual  means 
of  subsistence  are  drawn  from  foreign  agriculture.  If 
we  could  transport  them  to  this  country,  and  incorporate 
them  in  the  mass  of  our  own  population,  there  would 
instantly  arise  a  demand  for  an  amount  of  provisions 
equal  to  that  which  would  be  requisite  for  their  sub- 
sistence throughout  the  whole  year.  That  demand  in 
the  article  of  flour  alone  would  not  be  less  than  the 
quantity  of  about  900,000  barrels,  besides  a  proportionate 
quantity  of  beef  and  pork  and  other  articles  of  sub- 
sistence. But  900,000  barrels  of  flour  exceeded  the 
entire  quantity  exported  last  year  by  nearly  150,000 
barrels.  What  activity  would  not  this  give,  what  cheer- 
fulness would  it  not  communicate  to  our  own  dispirited 
farming  interest !  But  if,  instead  of  these  500,000  ar- 
tisans emigrating  from  abroad,  we  give  by  this  bill 
employment  to  an  equal  number  of  our  own  citizens  now 
engaged  in  unprofitable  agriculture,  or  idle  from  the 
want  of  business,  the  beneficial  effect  upon  the  produc- 
tion of  our  farming  labor  would  be  nearly  doubled. 
The  quantity  would  be  diminished  by  the  subtraction  of 
the  produce  from  the  labor  of  those  who  should  be 
diverted  from  its  pursuits  to  manufacturing  industry, 
and  the  value  of  the  residue  would  be  enhanced,  both  by 
that  diminution  and  the  creation  of  the  home  market  to 
the  extend  supposed  ..." 

The  Tarifif  Act  of  1824.  Clay's  able  leadership  and 
powers  of  persuasion  secured  the  enactment  of  the  tariff' 
law  of  1824.  Higher  duties  were  placed  upon  manufac- 
tures of  wool,  iron,  lead  and  glass.  The  rate  of  duty  on 
cotton  goods  was  not  increased  but  additional  protection 
was  granted  by  raising  the  minimum  valuation  of  imported 
cottons.  For  the  first  time  manufacturers  of  hempen  ma- 
terials received  protection.     A  specific  duty  was  placed  on 


PROTECTIVE  TARIFFS  255 

raw  wool  for  the  benefit  of  the  wool  growers,  though  this 
action  tended  to  neutralize  the  advantages  of  higher  duties 
on  woolen  manufactures.  The  hemp-growers  of  Kentucky 
obtained  protection  against  the  hemp  producers  of  Russia. 
The  tariff  bill  of  1824  met  with  vigorous  opposition. 
The  reason  for  urging  protection  this  time  was  not  to  re- 
lieve the  United  States  from  dependence  on  foreign  nations 
for  the  sake  of  greater  strength  in  time  of  war.  The  advo- 
cates of  this  bill  were  seeking  openly  to  promote  the  inter- 
ests of  particular  classes  of  the  population,  and  those  rep- 
resentatives in  Congress  whose  constituents  were  interested 
in  industries  other  than  manufacturing  and  grain  raising 
tried  to  defeat  the  bill.  Memorials  and  petitions  in  large 
numbers  were  sent  to  Congress  advocating  the  passage  of 
the  tariff  bill  and  protesting  against  it.  The  Chambers 
of  Commerce  of  New  York  and  Philadelphia  opposed  the 
measure,  but  manufacturers'  organizations  in  both  cities 
gave  it  vigorous  support.  In  the  House  of  Representatives 
Daniel  Webster  spoke  in  behalf  of  the  mercantile  and  ship- 
ping interests  of  New  England,  who  feared  that  the  devel- 
opment of  manufacturing  would  cause  a  decline  in  foreign 
trade.  John  Randolph  spoke  for  the  Southern  planters 
who  felt  that  increased  tariff  duties  would  bring  higher 
prices  for  manufactured  goods  and  food  products.  The 
bill  was  carried  through  the  House  by  the  representatives 
from  the  farming  districts  of  the  Middle  Atlantic  fnd 
Western  States  and  from  the  manufacturing  centers  in 
Rhode  Island,  Connecticut,  New  York,  New  Jersey  and 
Pennsylvania.  A  majority  of  the  representatives  from 
New  England  opposed  the  bill ;  the  South  voted  almost 
solidly  against  it ;  the  representatives  from  the  commercial 
cities  of  the  Middle  Atlantic  States  likewise  joined  the 
opposition.  The  decision  was  so  close  that  the  change  of 
three  votes  would  have  defeated  the  bill.  The  following 
table  shows  the  vote  of  the  representatives  of  different 


256  PROTECTIVE  TARIFFS 

sections  of  the  country  on  the  tariff  acts  of  1816  and  1824. 

Act  of  1816  Act  of  1824 

Yeas         Nays  Yeas         Nays 

New  England  States  17             10  15            23 

Middle  Atlantic   States    44             10  60             15 

Western    States    10               1  29               0 

Southern  States   17             33  3             64 

The  Tariff  of  1828.  In  1824  Great  Britain  repealed  her 
duties  on  wool,  thereby  enabling  the  British  woolen  manu- 
facturers to  obtain  their  raw  material  at  a  lower  price. 
This  caused  a  sharp  reduction  in  the  price  of  British 
woolens,  which  created  among  American  woolen  manufac- 
turers an  urgent  demand  for  increased  protection.  A  bill 
increasing  the  rates  of  duty  on  woolen  goods  passed  the 
House  of  Representatives  in  1827,  but  was  lost  in  the 
Senate  by  the  vote  of  the  Vice-President.  Shortly  after- 
wards a  convention  was  held  at  Harrisburg,  Pennsylvania 
for  the  purpose  of  urging  increased  protection  of  American 
industries.  This  "Harrisburg  Convention"  recommended 
higher  duties  on  virtuall}^  all  manufactured  goods  as  well 
as  upon  many  agricultural  products. 

Shortly  after  Congress  met  in  December  a  new  tariff 
bill  was  introduced  in  the  House  and  referred  to  the  Com- 
mittee on  Manufactures,  which  made  a  report  late  in  Jan- 
uary. This  was  the  year  of  a  presidential  election,  and 
the  new  tariff  bill  was  framed  primarily  with  a  view  to 
political  effect.  Andrew  Jackson  and  President  Adams 
were  the  leading  candidates  for  the  presidency.  The 
Northern  supporters  of  Jackson,  though  believing  in  the 
protective  policy,  were  not  anxious  to  see  a  high  tariff 
bill  passed,  because  they  feared  it  might  lose  Jackson  the 
support  of  the  South.  At  the  same  time  they  did  not 
want  to  take  the  responsibility  of  defeating  a  high  tariff 
bill.  Jackson's  Southern  supporters  did  not  want  to 
put  his  Northern  friends  in  the  position  of  opposing  pro- 


PROTECTIVE  TARIFFS  257 

tection.  The  Jackson  men  therefore,  both  Northern  and 
Southern,  united  in  framing  a  bill  which  gave  greatly  in- 
creased protection  to  manufacturers,  but  which  carried 
such  high  rates  of  duty  on  raw  materials  as  to  make  it 
obnoxious  to  the  manufacturers  of  New  England,  where 
Adams's  chief  support  for  the  presidency  was  to  be  found. 
In  this  way  they  hoped  to  force  the  supporters  of  Presi- 
dent Adams  to  vote  against  the  bill.  The  Jackson  men 
of  the  South  would  also  vote  against  it  and  receive  credit 
in  the  South  for  defeating  it;  the  Jackson  men  of  the 
North  could  vote  for  it  and  posing  as  the  "friends  of  pro- 
tection" cast  the  blame  for  the  defeat  of  the  bill  upon  the 
friends  of  Adams.  John  Randolph  cynically  remarked, 
"The  bill  referred  to  manufactures  of  no  sort  or  kind,  ex- 
cept to  the  manufacture  of  a  President  of  the  United 
States." 

To  the  surprise  of  its  authors  the  bill  of  1828  passed 
both  Houses  of  Congress  and  became  a  law.  It  met  with 
the  entire  approval  of  nobody,  but  it  was  thought  by  the 
ardent  protectionists  to  be  better  than  no  legislation  what- 
ever. An  interesting  feature  of  the  debate  on  the  bill  was 
that  Daniel  Webster,  at  this  time  in  the  Senate,  made  a 
speech  in  favor  of  protection  just  as  vigorous  and  powerful 
as  the  speech  which  four  years  before  he  had  made  in  the 
House  against  protection.  By  1828  manufacturing  had 
made  such  headway  in  Massachusetts  that  the  influence  of 
the  shipping  and  mercantile  interests  was  no  longer  the 
only  powerful  factor  in  politics. 

The  law  of  1828  was  the  high  water  mark  of  protection 
until  the  time  of  the  Civil  War.  Its  chief  features  were 
increased  duties  upon  manufactures  of  iron  and  wool  and 
upon  raw  wool.  The  principle  of  minimum  valuation  was 
for  the  first  time  extended  to  woolen  goods;  and  imported 
wool  was  subjected  to  both  specific  and  ad  valorem  duties. 


258  PROTECTIVE  TARIFFS 

The  law  was  roundly  denounced  throughout  the  South 
and  in  many  Northern  communities.  It  became  known  as 
the  ''Tariff  of  Abominations"  and  the  "Black  Tariff." 

Tariflf  Legislation,  1830-1833.  Regardless  of  the  in- 
creased duties  of  1828  there  was  an  increase  in  the  im- 
ports of  manufactured  goods.  The  country  was  growing 
and  the  demand  for  manufactures  was  greater  than  the 
home  factories  could  supply.  The  high  duties  on  imported 
goods  brought  large  revenues  to  the  Federal  Treasury  and 
it  was  apparent  that  the  national  debt  would  soon  be  paid 
off  and  a  surplus  accumulated  in  the  Treasury.  This  situ- 
ation worried  the  friends  of  protection  because  it  made 
the  demand  for  a  decrease  in  duties  much  more  insistent. 
In  1830  several  attempts  were  made  to  revise  the  tariff  but 
the  protectionists  blocked  all  efforts  to  decrease  the  duties 
on  manufactured  goods,  permitting  only  the  reduction  of 
the  duties  on  salt,  molasses,  coffee  and  tea.  Notwithstand- 
ing these  changes  the  revenues  of  the  Government  con- 
tinued to  grow.  Henry  Clay  urged  the  abolition  of  the 
duties  on  imported  articles  which  did  not  compete  with 
American  products;  the  opponents  of  protection  demanded 
the  reduction  of  duties  on  manufactures. 

In  1831  the  friends  and  the  opponents  of  protection  each 
held  a  national  convention,  the  former  meeting  in  New 
York  and  the  latter  in  Philadelphia.  Both  conventions 
drew  up  memorials  representing  the  current  views  on  the 
tariff  question,  the  one  urging  Congress  to  abandon  the  pol- 
icy of  protection  and  the  other  asking  for  legislation  to 
strengthen  that  policy. 

When  Congress  met,  attempts  to  modif}-  the  act  of  1828 
were  renewed.  Clay,  who  had  been  elected  to  the  Senate, 
defended  his  "American  System"  in  a  series  of  powerful 
speeches,  and  refused  to  surrender  the  principle  of  protec- 
tion. The  Southern  members  of  Congress  were  unable  to 
bring  about  a  radical  reduction  of  tariff  duties,  but  chiefly 


PROTECTIVE  TARIFFS  259 

through  the  efforts  of  John  Quincy  Adams,  who  after  re- 
tiring from  the  presidency  had  been  elected  to  the  House 
of  Representatives,  a  new  tariff  law  was  enacted  in  1832, 
which  eliminated  some  of  the  worst  features  of  the  act  of 
1828  and  restored  many  of  the  duties  contained  in  the  act 
of  1824.  The  representatives  from  Virginia  and  North 
Carolina  supported  the  tariff  bill  of  1832,  and  it  passed  the 
House  by  a  vote  of  two  to  one,  the  only  bill  enacted  since 
1816  which  had  obtained  much  more  than  a  bare  majority 
in  its  favor. 

The  law  of  1832  was  however  decidedly  protective  in  its 
provisions.  The  legislature  of  South  Carolina,  exasperated 
by  what  it  considered  the  discriminatory  sectional  legisla- 
tion of  Congress,  called  a  special  convention  in  November, 
1832,  which  passed  the  famous  nullification  ordinance  de- 
claring ''the  tariff  law  of  1828  and  the  amendment  to  the 
same  in  1832"  to  be  null  and  void  and  not  binding  upon 
the  people  of  South  Carolina.  It  declared  that  no  duties 
under  the  law  should  be  collected  in  South  Carolina  after 
February  1,  1833  and  that  no  appeal  should  be  allowed  to  a 
Federal  court  in  any  case  arising  from  the  nullification 
program.  President  Jackson  quickly  issued  a  stirring 
proclamation  announcing  his  intention  of  enforcing  the 
law.  Calhoun  resigned  the  vice-presidency  in  order  to 
give  support  to  the  action  of  his  State,  and  he  was  at  once 
elected  to  the  Senate.  A  new  tariff  bill  was  introduced 
providing  for  a  radical  reduction  of  import  duties.  Clay, 
fearing  that  a  sudden  reduction  would  cause  irreparable 
injury  to  the  manufacturing  industries,  came  forward  with 
a  compromise  amendment,  which  was  accepted  and  passed. 

Clay's  compromise  provided  for  a  general  reduction  of 
all  duties  exceeding  twenty  per  cent.  Each  year  for 
eight  years  the  excess  above  twenty  per  cent  was  to  be 
reduced  one-tenth,  and  in  1842  two  reductions  of  ten  per 
cent  each  were  to  be  made.     Thus  by  the  end  of  1842  there 


260  PROTECTIVE  TARIFFS 

would  be  no  rate  of  duty  higher  than  twenty  per  cent. 
The  bill  appeased  South  Carolina  and  received  the  sup- 
port of  virtually  the  entire  South.  A  majority  of  West- 
ern representatives  voted  for  the  bill,  but  it  was  opposed 
by  a  majority  of  the  representatives  from  New  England 
and  the  Middle  Atlantic  States,  partly  because  they  op- 
posed any  reduction  of  the  tariff  and  partly  because  they 
objected  to  making  any  concession  to  the  defiant  attitude 
of  South  Carolina. 

The  EflFects  of  the  Protective  Policy.  There  has  always 
been  a  wide  divergence  of  opinion  as  to  the  results  of  the 
protective  tariff  legislation  from  1816  to  1833.  Too  often 
people  are  inclined  to  regard  any  contemporaneous  events 
in  the  relation  of  cause  and  effect,  when  possibly  no  such 
relation  exists.  While  it  is  true  that  manufacturing  pros- 
pered after  the  enactment  of  the  tariff  law  of  1824  it  does 
not  necessarily  follow  that  manufacturing  would  not  have 
prospered  had  this  law  not  been  enacted.  As  a  matter  of 
fact  the  war  duties  of  1815  were  much  higher  than  the 
duties  in  the  law  of  1824,  yet  the  manufacturing  industries 
of  the  United  States  were  ruined  by  the  excessive  imports 
of  1815.  It  is  also  true  that  manufacturing  industries  were 
generally  prosperous  in  1822  and  1823  before  the  Act 
of  1824  was  passed. 

If  the  depression  of  agriculture  was  as  severe  in  1824 
as  Henry  Clay  pictured  it  to  be,  it  should  not  have  re- 
quired a  protective  tariff  to  draw  labor  from  the  farm  to 
the  factory.  The  price  of  food  was  sufificiently  low  to  en- 
able a  factory  laborer  to  live  comfortably  on  comparatively 
low  wages ;  moreover  the  profits  of  farming  were  so  small 
that  many  farmers  would  have  welcomed  the  opportunity  of 
securing  factory  employment. 

On  the  other  hand,  even  if  wages  were  low,  it  is  possible 
that  the  development  of  manufacturing  would  have 
been  much  slower  without  protection.     Manufacturers  may 


PROTECTIVE  TARIFFS  261 

have   been   and   probably   were   able   to   obtain   adequate 
profits  without  protection,  but  with  protection  they  could 
obtain  very  high  profits.     These  high  profits  would  con- 
tinue as  long  as  the  demand  for  manufactured  goods  ex- 
ceeded the  supply  offered  by  home  producers.     The  price 
of  foreign  goods  would  be  kept  up  by  the  tariff.     This 
promise  of  excessive  profits  induced  many  individuals  to 
undertake  the  development  of  manufacturing  industries, 
who  otherwise  might  have  invested  their  capital  in  ship- 
ping or  in  mercantile  pursuits  or  in  cotton  planting.     The 
reasonable  view  seems  to  be  that  after  1820  manufactur- 
ing would  have  been  developed  gradually  in  the  United 
States  without  further  protection,  but  that  with  protec- 
tion it  was  stimulated  to  a  much  more  rapid  development. 
Whatever  the  influence  of  the  tariff  legislation,  there  was 
after  1820  a  gratifying  expansion  of  the  manufacturing 
industries  of  the  United  States.     Throughout  the  North- 
ern States,  both  east  and  west,  dozens  of  new  factories  were 
built.     In   1830   the   products  of   the   cotton   and  woolen 
mills  of  the  United  States  amounted  in  value  to  $37,000,- 
000.     The  production  of  pig-iron  was  195,000  tons.     Cities 
such  as  Lowell,  Lawrence,  Paterson  and  Newark,  which 
owed  their  prosperity  chiefly  to  manufacturing,  began  to 
rival  in  wealth  and  population  the  older  commercial  cities. 
In  the  West  the  cities  of  Pittsburgh,  Cincinnati  and  Louis- 
ville doubled  in  size  during  the  decade  from  1820  to  1830, 
and  in  all  of  them  the  people  were  inordinately  proud  of 
their  manufacturing  industries.     In  1830  Pittsburgh  had 
six  "rolling  mills  and  iron  works  with  nail  factories  at- 
tached," four  large  cotton  factories  with  10,000  spindles, 
two  ''large  glass  works"  and  "270  other  large  manufac- 
turing establishments  of  a  miscellaneous  character."     Cin- 
cinnati, with  a  population  of  26,000  was  "the  most  flour- 
ishing commercial  town  in  the  West,  except  New  Orleans; 
and  furnishes  perhaps  the  most  original  example  of  that 


262  PROTECTIVE  TARIFFS 

spirit  and  capacity  for  improvement,  which  result  from 
the  existence  of  free  institutions,  and  are  destined  to  fill 
the  Mississippi  Valley  with  a  teeming  population." 

Thousands  of  Europeans,  glad  to  leave  places  so 
long  a  scene  of  disorder  and  distress,  came  to  prosperous 
America.  The  number  of  immigrants  coming  to  the 
United  States  between  1820  and  1837  was  more  than 
500,000.  The  coming  of  these  immigrants  was  helpful  to 
all  branches  of  industry — manufacturing,  mining,  farming 
and  planting. 

Questions  and  Topics 

1.  Compare  the  motives  for  the  tariff  acts  of  1816  and 
1824  with  those  for  the  tariff  of  1789. 

2.  Give  three  reasons  why  grain  is  no  longer  as  cheap 
as  it  was  in  1824. 

3.  Give  examples  where  party  interests  have  interfered 
with  legislation  that  the  majority  of  the  people  desired. 

4.  Does  the  "Black  Tariff"  prove  to  you  that  party  poli- 
tics are  inimical  to  the  best  interests  of  the  country? 

5.  What  do  you  think  of  a  principle  of  government ' '  The 
greatest  good  to  the  greatest  number  of  people"  as  a  basis 
for  the  making  of  laws? 

6.  Write  a  short  biographical  sketch  of  Henry  .Clay  ? 

7.  Is  there  any  way  of  punishing  a  State  for  an  act  of 
disloyalty  ? 

8.  Give  a  brief  account  of  the  life  of  Andrew  Jackson? 

9.  Is  the  coming  of  immigrants  to  the  United  States  as 
helpful  to  the  country's  development  at  present  as  it  was 
from  1820  to  1837  ? 


CHAPTEE  XIV 
INTERNAL  IMPROVEMENTS 

The  Federal  Government  and  Internal  Improvements. 

Though  the  most  emphasized  feature  of  the  American  Sys- 
tem was  the  protection  of  manufactures  by  a  high  tariff, 
the  advocates  of  the  system  considered  the  construction  of 
internal  improvements  to  be  an  indispensable  part  of  their 
general  plan  for  promoting  the  economic  development  of 
the  country.  The  tariff  legislation  was  intended  to  make 
possible  a  large  non-agricultural  population  which  would 
consume  the  surplus  products  of  the  farmers.  It  was  nec- 
essary to  have  a  system  of  roads  and  canals  by  which  the 
grain  and  provisions  could  be  carried  from  farms  to  fac- 
tory towns.  Henry  Clay,  the  "father  of  the  American 
System,"  spoke  frequently  of  the  need  of  better  transpor- 
tation agencies.  He  believed  that  the  construction  of  new 
roads  and  canals  should  be  undertaken  at  the  expense  of 
the  Federal  Government.  However  only  a  comparatively 
small  sum  from  the  national  treasury  was  expended  for 
such  work. 

It  has  already  been  told  how  in  1817  James  Madison 
vetoed  a  bill  authorizing  the  expenditure  of  national  funds 
for  internal  improvements.  In  1822  Congress  passed  a  bill 
appropriating  several  thousand  dollars  for  the  erection  of 
new  toll  gates  on  the  Cumberland  Road  and  authorizing  the 
collection  of  tolls  to  obtain  money  for  the  repair  of  the 
highway.  President  INIonroe  vetoed  this  bill,  asserting  that 
Congress,  by  collecting  tolls  within  the  States,  would  be 
exercising  a  jurisdiction  not  permitted  by  the  Constitu- 
tion,    He  submitted  to  Congress  a  long  written  opinion  in 

263 


264  INTERNAL  IMPROVEMENTS 

which  he  claimed  that  Congress  had  authority  to  appro- 
priate money  only  for  the  general  or  national  welfare,  and 
not  for  the  benefit  of  a  State  or  of  a  local  community. 

While  objecting  to  the  appropriation  of  money  for  in- 
ternal improvements  under  Federal  jurisdiction,  Monroe 
did  not  believe  that  the  appropriations  for  building  the 
Cumberland  Road  had  been  made  in  an  unconstitutional 
manner.  This  particular  road  he  considered  to  be  a  work 
of  general  and  not  local  benefit.  It  was  possible  therefore, 
according  to  Monroe,  to  proceed  with  the  construction  of 
this  road,  though  the  Federal  government  could  exercise  no 
jurisdiction  over  it  even  to  the  extent  of  policing  it  to  pre- 
vent wanton  destruction.  The  road  was  extended  from 
Wheeling  across  the  States  of  Ohio  and  Indiana,  passing 
through  the  capitals  of  both  States.  It  was  planned  to 
extend  this  "National  Pike"  to  Jefferson  City,  Missouri, 
but  construction  ended  in  1838  when  it  reached  Vandalia, 
Illinois.  Monroe  thought,  however,  that  before  Congress 
should  undertake  to  appropriate  large  sums  for  highways  or 
canals  the  Constitution  should  be  amended  to  give  to  the 
Federal  Government  the  jurisdictional  authority  which  he 
deemed  necessary  to  the  satisfactory  execution  of  a  compre- 
hensive plan  of   internal  improvements. 

John  Quincy  Adams  was  not  so  strict  in  the  construction 
of  the  Constitution  as  his  two  predecessors  in  the  presi- 
dency had  been,  and  during  his  term  of  office,  from  1825  to 
1829,  he  signed  many  bills  which  Congress  passed  author- 
izing the  expenditure  of  Federal  money  on  improvements  in 
various  States.  Altogether  Congress  appropriated  $2,310,- 
000  for  internal  improvements  during  Adams's  adminis- 
tration, most  of  the  money  being  used  to  purchase  the  stock 
of  canal  and  turnpike  companies.  After  Jackson  became 
President,  Congress  endeavored  to  continue  the  policy  of 
authorizing  subscriptions  to  the  stock  of  private  transpor- 
tation companies,  but  Jackson  vetoed  the  first  bill  pre- 


INTERNAL  IMPROVEMENTS  265 

sented  to  him  appropriating  money  for  such  a  purpose, 
raising  objections  similar  to  those  formerly  advanced  by 
Madison  and  Monroe. 

Jackson  believed  that  the  country  should  have  internal 
improvements,  but  he  thought  that  the  only  way  in  which 
the  Federal  Government  should  help  was  by  the  distribu- 
tion among  the  several  States,  in  proportion  to  their  popu- 
lation, of  whatever  surplus  the  Federal  Treasury  might  at 
any  time  accumulate.  He  was  somewhat  doubtful  of  the 
constitutionality  of  this  method,  but  in  1836,  after  the 
national  debt  was  extinguished,  he  signed  a  bill  authoriz- 
ing the  distribution  of  the  surplus  funds  of  the  Treasury. 
The  money  was  to  be  given  out  in  four  quarterly  instal- 
ments, payment  beginning  January  1,  1837.  Three  instal- 
ments, amounting  to  about  $28,000,000,  were  paid,  but 
before  the  fourth  instalment  fell  due  there  was  a  deficit 
instead  of  a  surplus  in  the  Treasury,  and  no  more  payments 
could  be  made.  Though  under  the  law  the  money  distrib- 
uted was  regarded  as  a  deposit,  to  be  recalled  at  will  by 
the  Federal  Government,  the  States  looked  upon  it  as  a 
gift  and  never  repaid  it.  The  obligations  are  still  carried 
as  an  asset  in  the  accounts  of  the  Treasury. 

The  distribution  of  the  surplus  in  1837  marked  the  last 
attempt  of  the  Federal  Government,  for  many  years,  to 
make  direct  contributions  of  money  for  the  purpose  of  con- 
structing internal  improvements  within  the  States.  Sev- 
eral appropriations  for  the  improvement  of  rivers  and 
harbors  received  Jackson's  assent,  partly  because  he  be- 
lieved them  to  be  in  the  general  interest  and  not  for  local 
advantage,  and  partly  because  they  were  passed  as  "riders" 
to  general  appropriation  bills  and  he  could  not  veto  them 
without  vetoing  the  entire  bills.  From  1839  until  after  the 
Civil  "War  appropriations  for  river  and  harbor  improve- 
ments were  infrequent  because  of  presidential  opposition. 

Though  refusing  to  contribute  money  for  the  construe- 


266  INTERNAL  IMPROVEMENTS 

tion  of  roads  and  canals,  the  Federal  Government  often 
gave  substantial  aid  for  such  works  in  the  Western  States 
by  granting  to  the  States  large  tracts  of  the  public  lands 
within  their  borders.  The  States  would  sell  such  lands  and 
devote  the  proceeds  usually  to  works  of  internal  improve- 
ment. The  policy  of  granting  public  lands  to  the  States 
began  on  an  extensive  scale  during  the  administration  of 
John  Quincy  Adams,  and  it  continued  for  nearly  a  half 
century. 

State  and  Private  Enterprises.  While  constitutional 
considerations  caused  the  Federal  Government  to  pursue  a 
wavering  policy  with  respect  to  internal  improvements 
there  was  nothing  to  prevent  the  State  governments  from 
attempting  to  meet  the  need  for  better  transportation  facili- 
ties. The  demand  for  improvements  was  insistent,  and  the 
State  legislatures  freely  authorized  the  expenditure  of  large 
sums  of  money.  Unfortunately  the  legislatures  did  not 
endeavor  to  raise  much  of  the  needed  money  by  taxation, 
but  obtained  it  by  borrowing.  State  bonds  were  sold 
abroad  in  large  quantities  between  1825  and  1837.  The 
fact  that  the  Federal  Government  had  paid  off  the  national 
debt  during  this  period  served  to  put  the  credit  of  America 
on  a  high  plane  among  European  investors,  many  of  whom 
did  not  understand  that  the  State  governments  were  en- 
tirely distinct  from  the  Federal  Government  in  the  matter 
of  financial  responsibility. 

In  many  instances  the  construction  of  internal  improve- 
ments was  undertaken  directly  by  the  public  authorities; 
frequently  however  private  corporations  built  the  internal 
improvements,  receiving  liberal  grants  of  money  from  State 
treasuries.  These  corporations  secured  part  of  their  funds 
by  selling  stocks  and  bonds  to  individual  investors,  and  as 
previously  stated,  several  corporations  were  able  during 
John  Quincy  Adams's  administration,  to  obtain  money 
from  the  Federal  Government. 


INTERNAL  IMPROVEMENTS  267 

A  Period  of  Canal  Construction.  The  transportation 
agency  which  was  the  chief  object  of  interest  between  1819 
and  1H37  and  upon  which  the  most  money  was  expended 
was  the  canal.  Large  sums  were  invested  in  turnpikes,  and 
from  1830  to  1837  there  was  a  substantial  amount  of  invest- 
ment in  railroads,  but  the  canal  was  of  preeminent  impor- 
tance. It  was  universally  recognized  that  transportation 
by  water  was  cheaper  and  more  efficient  than  transporta- 
tion on  ordinary  highways.  In  Gallatin's  report  in  1808 
a  great  deal  of  evidence  was  submitted  to  show  the  supe- 
riority of  canals  and  natural  waterways  over  turnpikes. 
Since  steam  railroad  transportation  was  not  a  demonstrated 
success  until  1829  it  was  but  natural  that  people  should 
devote  their  efforts  to  canal  construction. 

There  were  three  important  canal  systems  started  or 
completed  during  this  period.  One  system,  known  as  the 
anthracite  tide-water  canals,  was  designed  to  provide 
cheap  transportation  from  the  coal  mines  of  eastern  Penn- 
sylvania to  the  seaboard.  A  second  system  had  for  its  pur- 
pose the  connection  of  the  eastern  seacoast  with  the  Ohio 
River  Valley  and  the  basin  of  the  Great  Lakes.  The  most 
important  and  the  only  successful  canal  in  this  system 
was  the  Erie  Canal.  The  third  system  comprised  canals 
between  the  Great  Lakes  and  tributaries  of  the  Mississippi 
River.  Two  of  the  canals  in  this  system  joined  Lake  Erie 
with  the  Ohio  River,  a  third  connected  Lake  Erie  with  the 
Wabash  River,  and  a  fourth  joined  the  Illinois  River  and 
Lake  Michigan.  In  addition  to  these  three  systems  a  large 
number  of  auxiliary  canals  were  constructed  for  local  traf- 
fic and  for  meeting  particular  problems  of  transportation. 
Among  the  enterprises  of  this  nature  were  the  Chesapeake 
and  Delaware  Canal,  which  was  opened  in  1830  between 
Delaware  and  Chesapeake  Bays,  and  the  Louisville  and 
Portland  Canal  built  around  the  Falls  of  the  Ohio  and 
completed  in  1828.     ]\Iany  States  planned  complete  sys- 


268 


INTERNAL  IMPROVEMENTS 


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INTERNAL  IMPROVEMENTS  269 

tems  of  "public  works,"  with  canals  or  roads  extending 
to  all  important  agricultural  or  industrial  centers. 

The  Anthracite  Tide-Water  Canals.  The  anthracite 
tide-water  canals  consisted  in  part  of  canalized  rivers. 
The  first  of  these  improvements,  known  as  the  ' '  Schuylkill 
Navigation,"  was  opened  in  1826  between  Mount  Carbon 
and  Philadelphia.  It  consisted  of  a  series  of  locks  and 
short  canals  which  made  it  possible  to  transport  coal  down 
the  Schuylkill  River  at  all  times  except  when  the  river  was 
frozen.  Shortly  after  this  improvement  was  completed  a 
similar  improvement  was  made  along  the  Lehigh  River, 
which  enters  the  Delaware  River  at  Easton,  Pennsylvania. 
The  State  of  Pennsylvania  constructed  the  Delaware  Div- 
ision Canal  from  Easton  to  Bristol,  thus  making  it  possi- 
ble for  the  Lehigh  Valley  coal  to  reach  Philadelphia  by 
water. 

The  next  problem  was  to  establish  canal  connection  with 
New  York  City.  From  Phillipsburg,  New  Jersey,  just 
across  the  river  from  Easton,  the  Morris  and  Essex  Canal 
was  built  to  Jersey  City.  This  canal  was  not  equipped 
with  locks  throughout  its  entire  length.  At  several  points 
the  boats  were  transferred  from  one  canal  level  to  another 
on  wheeled  trucks  moving  on  inclined  planes.  The 
Delaware  and  Raritan  Canal,  from  Bordentown  to 
New  Brunswick,  afforded  a  second  water  route  across  the 
State  of  New  Jerse}^  while  the  Delaware  and  Hudson  Canal 
between  Honesdale,  Pennsylvania  and  Rondout,  New  York, 
offered  a  third  means  of  transporting  anthracite  coal  cheaply 
to  New  York  City.  The  Susquehanna  and  Tide-Water 
Canal,  along  the  Susquehanna  River,  offered  an  improved 
highway  to  Baltimore.  These  canals  were  nearly  all  opened 
before  1837.  IMost  of  them  were  constructed  by  private 
corporations,  aided  with  appropriations  from  State 
treasuries. 

The  Erie  Canal.     In  1825  the  Erie  Canal,  which  the 


270 


INTERNAL  IMPROVEMENTS 


State  of  New  York  had  begun  in  1817,  was  completed.  The 
construction  of  this  great  waterway  was  accomplished  in 
the  face  of  much  opposition  of  scheming  politicians.  De- 
Witt  Clinton,  who  was  the  leading  defender  of  the  canal, 
was  governor  of  New  York  when  construction  began  in 
1817.  He  was  reelected  in  1820,  but  the  opposition  to  the 
canal  became  so  vigorous  that  he  could  not  even  secure  a 


Completion  of  Erie  Canal 

From  a  photograph   of  a  paintinq   in    the   DeWitt   Clinton   High   School,   New 
York.     Copyrighted,  1910,  hy  C.  T.  Turner. 

renomination  in  1822.  The  opponents  of  the  canal  delayed 
the  completion  of  the  work.  In  1824  Clinton  was  trium- 
phantly elected  governor  a  third  time,  and  in  1825  he  of- 
ficiated at  the  ceremonies  which  marked  the  opening  of 
the  "Big  Ditch"  as  the  canal  was  derisively  named  by 
his  enemies.  On  October  26,  a  canal  boat,  the  Seneca 
Chief,  started  eastward  from  Buffalo  with  Clinton  and 
other   leading   citizens   aboard.     All    along   the   route   to 


INTERNAL  IMPROVEMENTS  271 

Albany  there  were  great  celebrations,  with  parades, 
speeches,  firing  of  guns  and  ringing  of  bells.  From 
Albany  the  Seneca  Chieif  was  escorted  by  a  fleet  of  steam- 
boats to  New  York  City,  where  the  triumphal  journey 
ended  on  November  4th.  Clinton  poured  a  keg  of  water 
from  Lake  Erie  into  New  York  Bay  near  Sandy  Hook,  a 
symbol  of  the  "marriage  of  the  waters"  of  the  great  inland 
seas  of  America  and  of  the  ocean. 

The  canal  was  362  miles  long,  4  feet  deep,  with  a  width 
of  28  feet  at  the  bottom  and  40  feet  at  the  surface.  It 
cost  the  State  of  New  York  about  $8,000,000.  The  Cham- 
plain  Canal  extending  from  Albany  to  Lake  Champlain, 
which  was  finished  in  1824,  cost  about  $2,000,000.  Even 
before  these  two  canals  were  finished  the  tolls  on  the  local 
traffic  which  they  carried  produced  a  revenue  for  the 
State  of  nearly  a  half  million  dollars  a  year.  By  1830  the 
tolls  amounted  to  more  than  a  million'  dollars  annually ; 
by  1837  the  total  tolls  collected  had  repaid  the  original 
outlay  and  provided  for  operating  expenses.  In  1835  the 
density  of  traffic  made  it  necessary  for  the  Erie  Canal  to 
be  enlarged. 

Before  the  opening  of  the  Erie  Canal  the  cost  of  trans- 
porting a  ton  of  freight  from  New  York  City  to  Buffalo 
was  about  $100,  and  the  time  consumed  in  making  the 
haul  was  twenty  days.  The  canal  reduced  the  time  to 
eight  days  and  the  cost  to  ten  dollars. 

There  have  been  few  events  which  have  had  a  greater  in- 
fluence upon  the  economic  development  of  a  nation  than 
the  construction  of  the  Erie  Canal.  The  problem  of  devel- 
oping the  interior  of  the  United  States  has  been  largely  a 
matter  of  providing  adequate  transportation.  The  Erie 
Canal,  at  the  time  of  its  completion,  was  the  most  important 
artificial  transportation  route  which  the  United  States  pos- 
sessed. It  not  only  gave  economic  unity  to  the  State  of 
New  York,  and  afforded  a  cheaper  means  of  transportation 


272 


INTERNAL  IMPROVEMENTS 


between  the  seaeoast  and  the  settled  regions  of  the  interior, 
but  it  opened  up  and  made  available  for  settlement  the 
vast  fertile  region  around  the  Great  Lakes.  Before  the 
canal  was  opened  the  Great  Lakes  were  of  little  commercial 
importance,  and  there  were  few  people  in  the  northern  part 
of  what  had  been  the  Northwest  Territory.  Buffalo  was 
but  a  small  town,  Cleveland  and  Toledo  were  struggling 


Canal  Boat  Travel  and  Trade 

frontier  settlements,  Detroit  was  a  military  and  fur  trad- 
ing post,  Chicago  and  Milwaukee  were  not  yet  founded. 
The  first  American  schooner  was  launched  on  the  lakes  in 
1797;  a  steamboat  was  built  on  Lake  Ontario  in  1816. 
"When  the  canal  was  finished  there  were  a  half  dozen  Ameri- 
can steamers  on  the  lakes,  most  of  which  were  engaged  in 
taking  supplies  to  frontier  posts  and  returning  with  furs 
and  peltries.     As  soon  as  the  canal  was  opened  thousands 


INTERNAL  IMPROVEMENTS  273 

or  settlers  swarmed  into  Ohio,  Indiana  and  Michigan,  and 
the  Great  Lakes  became  an  important  highway  of  com- 
merce. 

In  addition  to  the  Erie  and  Champlain  canals  the  State 
of  New  York  constructed  a  number  of  less  important  arti- 
ficial waterways.  The  Oswego  Canal  running  from  Oswego 
to  Syracuse  connected  the  Erie  canal  with  Lake  Ontario. 
Short  canals  were  constructed  from  the  Erie  Canal  to  the 
Lakes  Cayuga,  Seneca  and  Oneida.  The  Chenango  canal 
extended  from  Utica  to  Binghamton  on  the  Susquehanna 
River.  The  Black  River,  Chemung  and  Genesee  Valley 
canals  were  eventually  added  to  the  system,  giving  to  New 
York  nearly  1,000  miles  of  artificial  waterways. 

The  Pennsylvania  Canal  System.  The  Erie  Canal  gave 
New  York  City  a  great  advantage  over  Philadelphia  and 
Baltimore  in  competing  for  the  trade  of  the  West.  Trans- 
portation from  New  York  to  Buffalo  by  water  and  thence 
to  Pittsburgh  by  land  was  cheaper  than  direct  transporta- 
tion by  land  from  Philadelphia  to  Pittsburgh.  Fearing  a 
total  loss  of  the  Western  trade  the  people  of  Pennsylvania 
began,  in  1826,  an  extensive  system  of  "public  works." 
The  system,  when  completed,  contained  nearly  700  miles  of 
improved  waterways,  serving  various  sections  of  the  State. 
The  most  important  branch  of  the  system  was  the  "Main 
Line"  from  Philadelphia  to  Pittsburgh.  When  finished 
in  1834  the  "^lain  Line"  was  a  composite  rail  and  water 
route.  A  railroad  ran  from  Philadelphia  to  Columbia  on 
the  Susquehanna  River,  thence  a  canal  extended  along  the 
Susquehanna  and  Juniata  Rivers  to  HoUidaysburg. 
Transportation  over  the  mountain  range  between  HoUidays- 
burg and  Johnstown  was  acomplished  by  means  of  a  sys- 
tem of  railroads  and  inclined  planes.  On  the  level  stretches 
of  railroad  ears  were  drawn  by  horse  power.  The  cars 
were  pulled  up  the  inclined  planes  by  means  of  strong 
cables  which  were  wound  on  drums  turned  by  stationary 


274  INTERNAL  IMPROVEMENTS 

engines.  The  cars  descended  the  planes  by  action  of  grav- 
ity. A  canal  connected  Johnstown  with  Pittsburgh. 
Though  this  route  afforded  a  cheaper  means  of  transpor- 
tation than  turnpikes  it  was  inconvenient  and  expensive 
in  its  operation  and  was  never  able  to  compete  successfully 
with  the  Erie  Canal. 

The  Chesapeake  and  Ohio  Canal.  Two  years  after 
Pennsylvania  began  the  construction  of  the  "J\Iain  Line" 
a  corporation  chartered  by  Virginia  and  Maryland — a  suc- 
cessor of  the  old  Potomac  Company  of  which  George  Wash- 
ington had  for  a  time  been  president — began  the  construc- 
tion of  the  Chesapeake  and  Ohio  Canal  along  the  Potomac 
River,  starting  at  Georgetown.  The  incorporation  act  of 
the  Maryland  legislature  provided  that  a  lateral  canal 
should  be  constructed  to  Baltimore,  in  order  to  enable  that 
city  to  maintain  effective  competition  with  Philadelphia 
and  New  York.  Congress  appropriated  money  to  buy 
stock  in  the  company  and  President  Adams  dug  the  first 
spadeful  of  earth  at  the  celebration  which  marked  the  be- 
ginning of  the  work  on  July  4,  1828.  It  was  intended  to 
build  the  canal  to  the  Monongahela  River,  but  construc- 
tion was  so  difficult  and  expensive  that  progress  was  slow. 
It  was  1850  before  the  canal  was  finished  to  Cumberland. 
By  that  time  the  railroad  had  achieved  such  popularity  that 
further  construction  on  the  Chesapeake  and  Ohio  Canal  was 
abandoned. 

Canals  in  the  West.  The  completion  of  the  Erie  Canal 
caused  much  rejoicing  among  the  farmers  of  Ohio,  who 
were  anxious  to  have  cheaper  means  of  communication  with 
the  East.  To  take  advantage  of  the  New  York  waterway 
it  was  necessary  for  Ohio  to  have  waterways  from  the  cen- 
tral and  southern  portions  of  the  state  to  Lake  Erie.  In 
1832  the  Ohio  Canal  was  opened  between  Portsmouth  and 
Cleveland.  The  Miami  Canal  from  Dayton  to  Cincinnati 
gave  the  farmers  of  western  Ohio  a  roundabout  water  route 


INTERNAL  IMPROVEMENTS  275 

to  the  East,  Indiana  started  the  Wabash  and  Erie  Canal 
connecting  Evansville  and  Toledo  in  1832  but  the  work 
was  not  completed  until  1851.  The  northern  section  was 
opened  however  in  1845  and  the  Miami  Canal  was  then 
extended  northward  to  connect  with  it,  giving  Ohio  two 
waterways  from  lake  to  river.  The  Illinois  Canal,  opened 
in  1848,  extended  from  Chicago  to  LaSalle  on  the  Illinois 
River.  In  1855  the  State  of  Michigan  completed  the  first 
lock  and  canal  at  Sault  Ste.  Marie.  All  of  the  trunk 
line  canals  in  Indiana  and  Ohio  had  numerous  lateral 
branches  to  serve  local  communities.  Nearly  all  the 
Western  waterways  were  built  at  State  expense,  the  money 
being  obtained  by  loans  and  by  sales  of  the  large  tracts  of 
public  lands  granted  to  the  States  by  the  Federal  Gov- 
ernment. 

The  Railroad.  Though  canals  were  superior  to  turn- 
pikes the  transportation  problem  could  not  be  solved  by 
canals  alone.  They  were  expensive  to  construct,  and  in 
many  parts  of  the  country  they  could  not  be  constructed 
at  all  because  of  the  hilly  character  of  the  land.  Severe 
winters  in  the  Northern  States  often  made  it  impossible 
to  use  canals  more  than  seven  months  of  the  year.  There 
was  a  pressing  need  for  improved  means  of  land  transpor- 
tation. The  problem  was  solved  by  the  introduction  of  the 
steam  railroad. 

The  railroad  was  developed  long  before  the  steam  loco- 
motive. Early  in  the  eighteenth  century  a  few  English 
coal  mines  were  equipped  with  "rail"  roads  or  tramways. 
The  rails  were  long  wooden  stringers  provided  with  wooden 
flanges  on  both  sides  to  hold  the  wheels  of  the  wagons  on 
the  track.  This  tj'pe  of  rail  was  succeeded  by  a  rail  with  a 
single  flange,  and  near  the  end  of  the  eighteenth  century  the 
wheels  of  the  wagons  were  made  with  flanges,  and  the 
wooden  rails  were  surfaced  with  thin  plates  or  straps  of 
iron.     Railroads   of  this   kind   were   common   in    English 


276 


INTERNAL  IMPROVEMENTS 


mining  and  quarrying  districts  at  the  beginning  of  the 
nineteenth  century.  A  horse  could  draw  a  much  heavier 
load  on  such  a  road  than  on  a  turnpike  because  the  wheels 
had  much  less  friction  to  overcome. 

In  1826  a  "rail"  road  or  tramway  was  built  from  the 
stone  quarries  at  Quincy,  Massachusetts  to  a  wharf  on  the 


Mt.  Pisgah  Inclined  Plane,  Mauch  Chunk,  Pennsylvania 

Neponset  River  for  use  in  transporting  stone  for  the 
Bunker  Hill  monument.  This  road  was  three  mil^s  long. 
Near  the  quarries  the  road  ascended  a  steep  incline,  up 
which  the  wagons  were  drawn  by  a  stationary  engine.  The 
loaded  wagons  were  taken  to  the  wharf  part  of  the  way 
by  the  action  of  gravity  and  part  of  the  way  by  horses. 


INTERNAL  IMPROVEMENTS 


277 


This  Quiney  tramway  was  the  first  ''rail"  road  in  the 
United  States.  In  1827  a  coal  company  built  a  gravity 
railroad  at  Mauch  Chunk,  Pennsylvania,  to  transport  coal 
from  the  mines  to  the  Lehigh  River.  The  mules  which 
drew  the  coal  cars  or  wagons  up  the  incline  rode  down  the 
incline  on  the  cars.  Another  railroad  for  carrying  coal 
was  constructed  from  Carbondale,  Pennsylvania,  to  the 
terminus  of  the  Delaware  and  Hudson  Canal  at  Honesdale. 
These  first  American  railroads  were  designed  for  special 
purposes  and  were  not  for  public  use.  Their  superiority 
over  ordinary  highways  for  the  speedy  transportation  of 


The  Rocket 

heavy  loads  induced  many  people  in  America  to  believe  that 
railroads  would  be  superior  to  turnpikes  and  canals  in  ordi- 
nary transportation.  This  feeling  was  also  common  in 
England,  and  in  1826  some  English  capitalists  began  to 
construct  a  railroad  between  Liverpool  and  ^Manchester. 
The  same  year  the  Mohawk  and  Hudson  Railroad  Company 
was  chartered  by  the  State  of  New  York  to  build  a  railroad 
between  Albany  and  Schenectady.  It  did  not  begin  con- 
struction however  until  1830.  The  first  public  railroad 
in  the  United  States  was  the  Baltimore  and  Ohio.  Some 
Baltimore  capitalists,  who  were  skeptical  of  the  success  of 
the  Chesapeake  and  Ohio  Canal,  were  authorized  by  the 


278  INTERNAL  IMPROVEMENTS 

Maryland  legislature  in  1827  to  organize  a  corporation  to 
build  a  railroad  from  Baltimore  to  the  Ohio  River.  On 
July  4,  1828,  the  work  on  this  historic  enterprise  began,  the 
same  day  that  marked  the  beginning  of  the  canal  at  George- 
town. Charles  Carroll  of  Carrollton,  the  last  surviving 
signer  of  the  Declaration  of  Independence,  laid  the  tirst 
stone  of  the  railroad  track.  Before  the  end  of  1828  the 
road  was  completed  to  Ellicott's  Mills,  fourteen  miles  from 
Baltimore,  and  four  years  later  it  reached  Point  of  Rocks, 
The  example  of  the  people  of  Baltimore  was  readily  fol- 


The  Stourbridge  Lion 

lowed  elsewhere.  The  Mohawk  and  Hudson  Company 
started  the  first  link  of  what  was  later  to  be  the  great  New 
York  Central  System  in  1830,  Another  road  was  started 
the  same  year  between  Charleston  and  Hamburg,  South 
Carolina.  These  first  railroads  were  considered  merely  as 
a  superior  kind  of  turnpike.  Individuals  were  permitted 
to  use  their  own  vehicles  on  the  roads,  paying  the  compa- 
nies tolls  for  the  use  of  the  tracks.  The  corporations  also 
had  carriages  and  wagons,  and  acted  as  common  carriers 
of  passengers  and  merchandise.  Horsepower  was  used  al- 
most exclusively  until  after  1830,  though  some  experiments 


INTERNAL  IMPROVEMENTS  279 

were  made  with  cars  fitted  with  sails.  An  invention  was  at 
hand  however  which  was  soon  to  revolutionize  transpor- 
tation and  make  the  railroad  a  greater  success  than  the 
first  railroad  builders  ever  dreamed  it  could  be.  This  in- 
vention was  the  steam  locomotive. 

The  Steam  Locomotive.  The  first  successful  steam  loco- 
motive was  the  Rocket,  designed  by  an  English  engineer, 
George  Stephenson,  for  use  on  the  Liverpool  and  Manches- 


First  Passenger  Car  on  the  Baltimore  and  Ohio  Tiailroad 
Courtesy  of  the  Baltimore  and  Ohio  Railroad  Company. 

ter  Railroad.  Before  the  construction  of  the  Rocket  a 
number  of  workable  locomotives  had  been  built  in  England 
by  various  inventors,  but  like  the  early  steamboats,  these 
first  locomotives  were  not  a  success  commercially. 
Stephenson  built  several  locomotives  before  1829,  some 
of  which  were  used  for  drawing  coal  cars  on  the  Stock- 
ton and  Darlington  Railroad  in  northern  England,  but 
these  engines  were  too  heavy  and  too  slow  for  general  serv- 


280 


INTERNAL  IMPROVEMENTS 


ice.  They  weighed  ten  tons  each  and  had  a  speed  of  but 
four  miles  an  hour.  The  Rocket  weighed  but  seven  tons 
and  attained  a  speed  of  twenty-nine  miles  an  hour. 

Stephenson's  early  experiments  awakened  much  inter- 
est in  the  United  States  even  before  the  Baltimore  and  Ohio 
Railroad  was  started.  In  1825,  John  Stevens  of  Hoboken, 
New  Jersey,  built  a  crude  experimental  locomotive,  which 


The  Tom  Thumb 
Courtesy  of  the  Baltimore  and  Ohio  Railroad  Company. 

he  operated  on  a  small  track  near  his  home.  In  1828  Hora- 
tio Allen,  the  chief  engineer  of  the  Delaware  and  Hudson 
Company,  which  owned  the  Carbondale  and  Honesdale 
Railroad,  went  to  England  and  ordered  three  locomotives 
from  George  Stephenson's  foundry.  The  locomotives 
reached  New  York  City  the  following  year,  and  one  of  them, 
the  Stourbridge  Lion,  was  taken  to  Honesdale  and  given  a 
trial.     It  was  operated   successfully,  but  was  too  heavy 


INTERNAL  IMPROVEMENTS  281 

for  the  trestles  of  the  railroad,  and  was  soon  withdrawn 
from  service  and  dismantled.  In  1830  Peter  Cooper  built 
a  small  locomotive,  the  Tom  Thumb,  similar  to  the  one 
which  Stevens  had  made,  and  ran  it  on  the  Baltimore  and 
Ohio  Railroad.  This  demonstration  that  steam  transpor- 
tation on  the  railroad  was  feasible  induced  the  directors 
of  the  Baltimore  and  Ohio  Company  to  offer  a  prize  of 
$4,000  to  the  American  engineer  who,  before  June  1,  1831, 
would  construct  a  locomotive,  weighing  not  to  exceed  three 
and  a  half  tons,  which  would  be  capable  of  drawing  a  load 
of  fifteen  tons  on  a  level  railroad  at  a  speed  of  at  least 
fifteen  miles  an  hour.     Phineas  Davis  of  York,  Pennsylva- 


Stone  Marking  the   Spot  Where  Construction   of  the  Baltimore 
and  Ohio   Railroad   Was   Begun,  July  4,   1828 
Courtesy  of  the  Baltimore  and  Ohio  Railroad  Company. 

nia,  built  a  locomotive,  the  York,  which  easily  met  these 
specifications. 

Before  Davis  won  the  Baltimore  and  Ohio  prize  the 
West  Point  foundry  of  New  York  City  built  three  locomo- 
tives which  proved  to  be  highly  successful.  Two  of  them, 
the  Best  Friend  and  the  West  Point  were  used  on  the 
Charleston  and  Hamburg  Railroad  in  South  Carolina,  and 
the  third,  the  DeWitt  Clinton,  was  built  for  the  JMohawk 
and  Hudson  Railroad.  In  1831  the  Camden  and  Amboy 
Railroad  Company  imported  from  England  its  first  loco- 
tive,  the  John  Bull.     This  engine  was  used  for  many  years 


282 


INTERNAL  IMPROVEMENTS 


and  is  now  in  the  museum  of  the  Smithsonian  Institution 
at  Washington.  Matthias  Baldwin,  the  founder  of  the 
Baldwin  Locomotive  Works  of  Philadelphia,  built  his  first 
locomotive.  Old  Ironsides,  in  1832.  American  inventors 
soon  contributed  many  improvements  to  the  locomotive 
as  well  as  to  all  the  other  mechanical  equipment  of  the 
railroad. 

Railroad  Construction.  The  success  of  the  steam  loco- 
motive aroused  a  great  enthusiasm  for  railroad  construc- 
tion, and  a  large  number  of  railroad  corporations  were  soon 


The  York 

chartered.  So  rapidly  did  construction  proceed  that  by 
1837  the  United  States  had  about  1500  miles  of  railroad 
line.  Most  of  this  mileage  was  in  the  Eastern  States.  The 
legislatures  of  Western  States  appropriated  several  million 
dollars  for  railroad  development  but  construction  did  not 
begin  in  the  West  on  an  extensive  scale  until  after  1845. 
In  the  main  the  early  railroads  were  intended  for  passen- 
ger service.  Many  of  them  were  built  to  connect  well 
traveled  water  routes.  The  Newcastle  and  Frenchtown 
Railroad  connected  boat  lines  on  the  Delaware  and  Chesa- 
peake Bays;  the  Boston  and  Providence  road  shortened 


INTERNAL  IMPROVEMENTS 


283 


the  time  of  passage  between  Boston  and  New  York ;  the  rail- 
roads in  the  Main  Line  of  the  Pennsylvania  Public  Works 
connected  sections  of  canal  navigation.  It  was  not  gener- 
ally believed  that  railroad  transportation  could  ever  com- 
pete successfully  with  water  transportation,  though  a  num- 
ber of  enthusiastic  friends  of  the  new  device  confidently 
predicted  that  it  would  drive  the  canals  and  the  steam- 
boats out  of  business.  The  general  adoption  of  the  loco- 
motive made  it  impracticable  to  permit  individuals  to  use 
railroads  as  they  used  other  highways,  and  the  railroads 
assumed  the  duty  of  supplying  all  motive  power  and  most 


De  Witt  Clinton  and  Train,  1831 
Courtesy  of  the  New  York  Central  Railroad  Co. 

of  the  cars.  Shippers  were  permitted  to  supply  their  own 
cars  if  they  chose  to  do  so,  but  the  movement  of  the  trains 
was  controlled  by  the  railroad  companies.  The  railroad 
company  was  a  common  carrier  which  not  only  performed 
the  service  of  transportation  but  owned  the  road  and  the 
equipment  with  which  the  work  was  done. 

Development  of  the  Steamboat.  While  canal  and  rail- 
road construction  was  adding  to  the  transportation  facili- 
ties of  the  country  the  steamboat  was  being  steadily  im- 
proved. The  small  Clermont  with  its  uncovered  paddle- 
wheels  was  succeeded  on  the  Hudson  River  by  vessels  of 
500  tons  and  more,  with  improved  engines,  "houses"  on 


284  INTERNAL  IMPROVEMENTS 

the  paddle-wheels,  and  equipment  which  made  steamboat 
travel  on  the  Hudson  not  only  comfortable  but  luxurious. 
It  took  the  Clermont  32  hours  to  go  from  New  York  to 
Albany ;  in  1825  the  Chief  Justice  Marshall  made  the  trip 
in  141/2  hours.  All  the  navigable  rivers  and  bays  of  the 
Atlantic  Coast  had  a  large  steamboat  traffic,  and  a  few 
strong  steamboats  were  built  before  1837  to  operate-  along 
the  coast. 

The  Mississippi  River  system  was  the  most,  important 
field  of  steamboat  service,  and  on  these  waters  too  larger 
and  faster  boats  were  built  each  succeeding  year.  In  1837 
the  Tecumseh  ascended  from  New  Orleans  to  Louisville  in 


The  Twentieth  Century  Limited 
Courtesy  of  the  New  York  Central  Railroad  Co. 

8  days  and  2  hours,  as  compared  with  25  days  required  for 
a  similar  voyage  by  the  E7iterprise  in  1817.  By  1837 
there  were  250  steamboats  on  the  Mississippi,  and  the  num- 
ber of  steamboat  arrivals  at  New  Orleans  each  year  was 
more  than  a  thousand.  Many  of  the  steamboats  on  the 
"Western  rivers  were  equipped  with  stern  paddle-wheels, 
which  were  more  suitable  than  side-wheels  for  use  in  shal- 
low water.  Steamboat  travel  on  the  Western  rivers  was 
not  free  from  danger.  High  pressure  engines  were  used 
on  most  of  the  boats,  and  disastrous  boiler  explosions  oc- 
curred with  an  all  too  tragic  frequence.  The  shoals  of  the 
river  bed   and   the   ''snags" — trees   and   logs  which    fro- 


INTERNAL  IMPROVEMENTS  285 

quently  became  lodged  in  the  channel — were  also  sources 
of  danger. 

The  opening  of  the  Erie  Canal  stimulated  the  construc- 
tion of  steamboats  for  use  on  the  lakes.  Three  new 
steamers  were  launched  on  Lake  Erie  in  1826,  and  regular 
service  was  established  from  Buffalo  to  Cleveland 
and  Detroit.  Shortly  after  1830  steamer  service  was 
extended  to  Lake  Michigan.  In  1834  the  association 
controlling  steamboat  transportation  on  the  lakes  oper- 
ated 18  vessels,  carrying  thousands  of  emigrants  on 
their  way  to  take  up  "Western  lands.  Six  years  later  the 
number  of  steamboats  had  increased  to  48.  Dozens  of 
sloops  and  schooners  also  took  part  in  the  development  of 
the  commerce  on  the  lakes. 

Questions  and  Topics 

1.  What  advantages  has  water  transportation  over  rail- 
road transportation?     Railroad  over  water? 

2.  On  an  outline  map  of  the  United  States,  mark  the 
canal  system  existing  in  1830. 

3.  If  water  transportation  is  cheaper  than  railroad  trans- 
portation, why  are  the  canal  systems  now  used  compara- 
tively little? 

4.  Why  did  not  the  government  rather  than  private 
companies  build  the  railroads? 

5.  What  bearing  did  the  doctrine  of  "State  Rights" 
have  on  internal  improvements? 

6.  Can  commercial  airplane  service  revolutionize  trans- 
portation as  much  as  railways  did  in  the  19th  century? 
Give  reasons. 


CHAPTER  XV 
INDUSTRIAL  AND  COMMERCIAL  EXPANSION 

Expansion  of  Production  and  Internal  Trade.  While 
the  steady  improvement  of  the  agencies  of  transportation 
was  taking  place  there  was  a  rapid  expansion  in  the  pro- 
duction of  wealth  throughout  the  United  States.  Better 
transportation  facilities  made  possible  a  territorial  division 
of  labor,  and  the  country  became  separated  into  three 
great  economic  sections:  the  South,  where  cotton  culture 
was  the  all  important  industry;  the  West,  where  the  pro- 
duction of  grain  and  live  stock  was  the  leading  economic 
activity;  and  the  East,  where  agriculture  gradually  lost 
its  relative  rank  among  the  industries  of  the  people,  giving 
precedence  to  manufacturing,  mining,  and  commerce.  Out 
of  this  sectional  division  of  labor  grew  a  large  domestic 
commerce,  much  greater  in  value  than  the  foreign  trade 
which  during  previous  times  had  absorbed  so  large  a  share 
of  the  national  interest. 

The  South.  The  South  was  an  important  factor  in  the 
economic  situation.  After  the  ''hard  times"  which  fol- 
lowed the  panic  of  1819  had  subsided,  there  was  a  great  in- 
crease in  the  cultivation  of  cotton  throughout  the  South, 
and  especially  in  the  lower  Mississippi  Valley.  The  cot- 
ton planters  took  up  the  best  remaining  lands  in  Alabama 
and  Mississippi,  moved  across  the  Mississippi  River,  up 
the  fertile  valleys  of  the  Red  and  Arkansas  Rivers,  and 
even  over  to  the  rich  coastal  plain  of  Texas.  Arkansas  was 
admitted  to  the  Union  in  1836,  and  a  spirited  agitation 
for  the  annexation  of  the  newly  created  republic  of  Texas 
was  begun  by   Southern  political   leaders,   who  were   de- 

286 


INDUSTRIAL  EXPANSION  287 

sirous  of  extending  the  slave  territory  of  the  United 
States. 

Hundreds  of  planters  from  the  coastal  states  of  the 
South  and  from  the  border  states  of  Kentucky  and  Mary- 
land emigrated  with  their  slaves  and  live  stock  to  the  bet- 
ter lands  of  the  lower  Mississippi  Valley.  Shortly  before 
1830,  Jefferson  Davis,  who,  like  Abraham  Lincoln,  was  born 
in  Kentucky,  went  to  Mississippi  to  engage  in  cotton  plant- 
ing. The  average  cotton  plantation  contained  several 
thousand  acres  and  the  wealthier  planters  often  numbered 
their  slaves  by  the  hundred.  From  1820  to  1830  the  cot- 
ton crop  of  the  United  States  increased  from  334,228  bales 
to  732,518  bales  of  500  pounds  each.  By  1835  the  total 
cotton  crop  was  more  than  a  million  bales.  More  than 
one-half  the  crop  of  1835  was  raised  on  the  plantations  of 
the  Mississippi  Valley ;  a  quarter  of  a  century  before  barely 
one-sixteenth  of  the  total  cotton  crop  was  produced  out- 
side the  four  coastal  states  of  Virginia,  North  Carolina, 
South  Carolina  and  Georgia. 

The  chief  market  for  the  huge  crops  of  cotton  was  Eng- 
land. The  cotton  mills  of  the  Eastern  states  and  of  the 
cities  in  the  Ohio  Valley  consumed  a  part  of  the  Southern 
staple,  but  the  foreign  market  took  much  more  than  half 
the  annual  crop.  Cotton  led  all  other  American  exports. 
From  1825  until  the  Civil  War  the  exports  of  cotton  each 
year  were  usually  greater  in  value  than  all  other  domestic 
exports  of  the  United  States  combined.  New  Orleans,  the 
leading  cotton  market,  had  domestic  exports  of  greater 
value  than  the  domestic  exports  of  any  other  American 
seaport. 

Absorbed  in  the  production  of  cotton  the  people  of  the 
South  gave  comparatively  little  attention  to  other  branches 
of  industry.  The  sugar  planters  of  Louisiana  were  pros- 
perous, there  was  a  steady  increase  of  tobacco  culture  in 
Tennessee,  and  hundreds  of  "small  farmers"  throughout 


288  INDUSTRIAL  EXPANSION 

the  South,  many  of  whom  owned  no  slaves  whatever,  en- 
gaged in  diversified  farming,  producing  corn,  vegetables, 
cattle,  mules  and  hogs.  The  more  progressive  cotton 
planters  produced  much  of  the  food  and  live  stock  needed 
for  their  plantations,  but  no  product  or  group  of  products 
compared  favorably  with  cotton.  IMost  of  the  planters  in- 
vested their  surplus  savings  in  slaves  to  ' '  raise  more  cotton 
to  buy  more  slaves  to  raise  more  cotton."  For  live  stock, 
flour  and  provisions  they  depended  in  a  large  measure  upon 
the  Western  farmers;  for  manufactured  goods  and  im- 
ported supplies  they  turned  to  the  merchants  of  the  East. 
With  nearly  all  available  capital  devoted  to  cotton  cul- 
ture the  South  made  little  progress  in  such  pursuits  as 
manufacturing,  banking,  commerce  and  shipping.  There 
were  few  cities  of  importance  aside  from  New  Orleans,  and 
the  great  export  trade  of  that  seaport  paid  tribute  to  North- 
ern bankers,  brokers  and  shipowners. 

The  West.  The  expansion  of  cotton  culture  in  the  South 
and  the  resulting  demand  for  grain,  provisions  and  live 
stock  served  to  relieve  the  distress  which  the  Western  farm- 
ers experienced  after  the  panic  of  1819.  Steamboats  and 
flatboats  carried  ever  increasing  quantities  of  salt  meat, 
lard,  butter,  cheese,  corn,  wheat,  flour,  whiskey,  hay,  fruit 
and  manufactured  goods  down  the  ^Mississippi.  Until 
railroad  transportation  was  developed  the  flatboat  remained 
an  important  factor  in  the  Western  river  trade.  Steam- 
boats could  not  ascend  the  smaller  streams,  and  the  farmers 
found  it  easier  to  build  flatboats  during  the  winter  months, 
load  them  with  produce  and  float  them  down-stream  during 
the  spring  freshets,  than  to  haul  their  produce  to  distant 
towns  located  on  rivers  navigable  by  steamboats.  Part  of 
the  traffic  descending  the  ^Mississippi  was  sold  at  planta- 
tion wharves  and  at  small  river  towns,  but  most  of  it  went 
to  New  Orleans  where  the  agents  of  the  planters  bought  it 
and  shipped   it  to   the   plantations   in   the   small   packet- 


INDUSTRIAL  EXPANSION  289 

steamers  which  carried  the  local  commerce  of  the  Southern 
rivers. 

The  expanding  Southern  market  and  the  easy  means  of 
transportation  brought  prosperity  to  the  West.  By  1830 
prices  were  good  and  trade  was  active.  Many  new  settlers 
came  to  take  up  the  vacant  lands  of  southern  Indiana  and 
Illinois.  The  life  of  the  Western  farmer  was  full  of  ardu- 
ous toil  and  great  hardship.  Much  of  the  land  was  low 
and  swampy,  and  until  drainage  was  provided  the  settlers 
suffered  from  ague.  Clearing  the  soil  of  trees  and  under- 
brush, building  houses,  barns  and  fences,  digging  ditches, 
planting,  cultivating  and  harvesting  the  grain  and  taking 
it  to  market,  feeding  and  caring  for  the  cattle,  horses  and 
hogs — the  men  on  the  farms  were  always  busy.  The  life  of 
the  women  was  likewise  full  of  constant  toil.  Not  only  did 
they  do  the  housework — cooking,  washing  and  sewing  for 
large  families — but  they  helped  with  the  outdoor  labor  of 
the  farm,  cultivating  the  vegetable  gardens,  milking  the 
cows,  making  butter  and  cheese,  earing  for  the  poultry,  and 
frequently  working  in  the  fields  with  the  men.  Few  com- 
forts and  conveniences,  scant  opportunity  for  education, 
little  amusement — yet  these  sturdy  farmers  and  their  fam- 
ilies pursued  their  way  with  enthusiasm  and  perseverance, 
rejoicing  in  the  "independence"  which  came  with  the  own- 
ership of  the  soil,  filled  with  a  glowing  confidence  in  the 
future  of  their  "great  West,"  laboring  constantly  for  im- 
provement and  making  much  of  their  meager  opportuni- 
ties The  future  always  held  "something  better"  in  store 
for  them.  Hundreds  of  families  were  frequently  on  the 
move,  barely  getting  settled  in  one  community  when  they 
would  sell  out  and  move  farther  west  where  opportunities 
for  achieving  wealth  seemed  greater. 

One  can  study  the  history  of  these  Western  farmers  in 
the  early  life  of  Abraham  Lincoln.  The  hardships  of  his 
boyhood  days  in  southern  Indiana  he  experienced  in  com- 


290  INDUSTRIAL  EXPANSION 

mon  with  other  people  in  that  section.  He  got  little  school- 
ing, but  he  received  as  much  as  most  of  the  boys  in  his 
neighborhood.  In  1828  he  went  to  New  Orleans  as  a  "bow- 
hand"  on  a  flatboat.  In  1830  his  family  moved  to  Illinois, 
taking  up  land  in  the  valley  of  the  Sangamon  River. 
Young  Lincoln  helped  his  father  clear  the  land  and  build 
a  log  cabin,  and  he  split  many  of  the  rails  with  which  the 
new  farm  was  fenced.  In  1831  he  took  a  second  flatboat 
trip  to  New  Orleans,  witnessing  on  this  occasion  the  sale 
of  negro  slaves  from  the  auction  block.  He  was  the  pilot 
of  the  first  steamboat  on  the  Sangamon  River,  and  in  1832 
he  entered  Illinois  politics  as  an  advocate  of  the  improve- 
ment of  that  stream. 

Though  the  chief  external  market  of  the  Western  farmers 
lay  in  the  South  they  sent  part  of  their  products  to  the  East. 
Large  herds  of  beef  cattle  were  driven  to  the  slaughter- 
pens  of  New  York,  Philadelphia  and  Baltimore.  It  was  not 
feasible  to  drive  fat  cattle  from  Illinois  directly  to  the  At- 
lantic coast  cities,  because  the  distance  was  so  great,  but 
many  Illinois  cattle  were  taken  to  the  Scioto  and  Musk- 
ingum valleys  in  the  fall,  fattened  with  corn  during  the 
winter,  and  driven  across  the  mountains  to  market  the  fol- 
lowing spring. 

The  opening  of  the  Erie  Canal,  the  Pennsylvania  Main 
Line  and  the  Ohio  Canal  gave  the  Western  farmers  better 
routes  of  communication  with  the  East,  but  the  eastbound 
movement  of  traffic  from  the  Ohio  Valley  over  these  routes 
was  relatively  light.  The  canals  did  not  divert  much  traffic 
from  the  Mississippi.  Pork  products  from  the  packing 
houses,  whisky,  hides  and  some  flour  were  sent  up  the  Ohio 
River  to  Pittsburgh,  and  through  the  Ohio  Canal  to  Cleve- 
land for  shipment  over  the  Main  Line  or  the  Erie  Canal, 
but  the  cost  of  transportation  over  these  routes  was  too 
great  to  permit  the  movement  of  grain.     It  was  just  as 


INDUSTRIAL  EXPANSION  291 

cheap  to  send  produce  down  the  river  to  New  Orleans  and 
ship  it  coastwise  to  the  Eastern  cities. 

After  the  Erie  Canal  opened  however  the  region  just 
south  of  the  Great  Lakes  was  settled  very  quickly,  and  the 
people  of  this  section  shipped  all  of  their  surplus  produce 
to  the  East.  The  growth  of  this  new  internal  trade  was 
exceedingly  rapid.  Previous  to  1830  virtually  all  of  the 
eastbound  traffic  of  the  Erie  Canal  consisted  of  articles 
produced  within  the  State  of  New  York.  In  1835  wheat 
and  flour  equivalent  to  268,000  barrels  of  flour,  from  States 
west  of  New  York,  arived  at  Albany  over  the  Erie  Canal. 
Ohio  was  the  first  of  the  Western  States  to  make  use  of  the 
lake-and-canal  route  for  the  transportation  of  grain ;  Indi- 
ana and  Michigan  quickly  followed,  using  the  ports  of 
Toledo  and  Detroit.  In  1836  the  first  eastbound  shipment 
of  grain  from  a  Lake  Michigan  port  was  recorded,  a  cargo 
of  3,000  bushels  of  wheat  from  Grand  Haven  to  Buffalo. 
The  Erie  Canal  made  possible  the  commercial  development 
of  the  wonderful  white  pine  forests  of  the  Great  Lakes  re- 
gion, and  shipments  of  Western  lumber  soon  made  up  a 
part  of  the  eastbound  canal  traffic.  A  highly  important 
result  of  the  development  of  the  Great  Lakes  district  was 
the  commercial  expansion  of  New  York  City.  All  the  ex- 
ports of  the  newly  settled  region  passed  through  New  York, 
greatly  increasing  the  lead  which  that  city  had  already  ob- 
tained over  rival  Eastern  ports. 

Unlike  the  people  of  the  South  the  inhabitants  of  the 
West  were  deeply  interested  in  the  development  of  manu- 
facturing, mining  and  transportation.  Textile  mills  pro- 
duced some  of  the  cotton  and  woolen  cloth  needed  for  local 
consumption,  and  a  number  of  factories  made  hempen  fabric 
for  use  in  baling  Southern  cotton.  Steamboat  yards  at 
the  leading  river  cities,  foundries  and  forges  for  the  manu- 
facture of  steam  engines  and  boat  fittings,  grist-mills  and 


292  INDUSTRIAL  EXPANSION 

pork-packing  plants  gave  employment  to  several  thousand 
laborers.  The  construction  of  highway  and  canal  systems 
also  caused  a  need  for  many  workmen,  whose  wages  went 
in  part  to  the  farmers  in  exchange  for  food.  The  most 
important  mineral  product  of  the  West  at  this  time  was 
lead,  which  was  produced  in  large  quantities  in  the  neigh- 
borhood of  Galena,  Illinois.  The  ore  was  smelted  near  the 
mines  and  the  lead  shipped  to  New  Orleans,  whence  it  was 
sent  coastwise  to  Eastern  cities  to  be  converted  into  finished 
products.  The  great  soft  coal  fields  of  the  West  were  dis- 
covered, but  little  effort  was  made  to  develop  them  be- 
cause wood  was  so  cheap  and  plentiful. 

The  Western  people  fell  short  of  producing  all  the  manu- 
factured supplies  which  they  needed,  and  with  part  of 
the  proceeds  of  their  sales  of  food  and  provisions  in  the 
South  they  bought  large  quantities  of  goods  from  the  mer- 
chants of  the  East.  Though  the  steamboat  afforded  an 
easy  means  of  transportation  from  the  South  the  West 
bought  but  little  from  that  section.  The  South  produced 
few  articles  that  the  West  wanted,  and  the  Southerners 
did  not  endeavor  to  import  goods  to  sell  to  the  Western 
farmers.  New  Orleans  was  a  great  export  center  but  its 
imports  were  comparatively  small.  Steamboats  went  down 
the  Mississippi  heavily  laden  but  their  return  freights 
were  light,  consisting  of  comparatively  small  quantities  of 
cotton  and  sugar  and  occasionally  some  heavy  articles  from 
the  Eastern  States  which  could  be  shipped  more  con- 
veniently by  way  of  New  Orleans,  The  Eastern  merchants 
supplied  the  wants  of  the  West,  and  they  found  a  good 
market  for  textiles,  furniture,  boots  and  shoes,  tools, 
household  goods,  and  miscellaneous  manufactures.  The 
Erie  Canal  took  virtually  all  the  westbound  merchandise 
traffic  from  the  highways,  and  incidentally  gave  New  York 
City  a  commanding  lead  in  the  Western  trade,  a  lead  which 
was  steadfastly  maintained  even  after  the  Pennsylvania 


INDUSTRIAL  EXPANSION  293 

Main  Line  enabled  Philadelphia  to  recover  a  part  of  the 
traffic. 

The  East.  While  the  South  and  West  were  expanding 
their  agricultural  production  the  most  significant  change 
in  the  East  was  the  development  of  manufacturing.  The 
manufacture  of  cotton  cloth  led  all  other  industries  in 
rapidity  of  growth.  Throughout  New  England  dozens  of 
new  cotton  mills  were  erected,  and  in  the  Middle  Atlantic 
States  also  large  sums  of  money  were  invested  in  new 
cotton  factories.  In  1822  a  group  of  Waltham  capitalists 
obtained  control  of  the  water-power  of  the  IMerrimac  River 
at  Pawtucket  Falls  and  founded  the  city  of  Lowell,  which 
soon  became  the  leading  cotton  manufacturing  city  of  the 
country.  At  numerous  other  points  along  the  Merrimac 
and  along  other  swift  New  England  streams  cotton  mills 
were  established.  Massachusetts  took  the  lead  in  the  pro- 
duction of  cotton  goods. 

The  number  of  women  and  girls  employed  in  the  cotton 
mills  was  twice  as  great  as  the  number  of  men  and  boys 
employed.  In  1831  nearly  one-half  of  the  8,000  workers 
in  the  cotton  mills  of  Rhode  Island  were  children  under 
12  years  of  age.  The  wages  of  the  men  ranged  from  $4 
to  $7  a  week  and  the  wages  of  the  women  and  children 
from  $1.40  to  $2.50.  The  work-day  was  never  less  than 
twelve  hours  and  in  many  mills  it  was  fourteen  and  sixteen 
hours.  It  was  more  difficult  to  obtain  workers  in  America 
than  in  England  where  the  cotton  mill  operatives  con- 
sisted largely  of  the  pauper  class.  However  the  transfer 
of  cloth  manufacture  from  home  to  factory  deprived  many 
women  and  girls  of  work  which  they  had  been  accustomed 
to  do,  and  some  of  them  followed  their  work  to  the  factory. 
Whatever  reluctance  parents  may  have  felt  about  letting 
their  daughters  go  to  the  cities  to  work  in  the  mills  was 
overcome  by  the  establishment  near  the  factories  of  large 
and    comfortable    dormitories,    maintained    by    the    mill 


294  INDUSTRIAL  EXPANSION 

owners.  The  charges  for  room  and  board  were  deducted 
from  the  weekly  wages  of  the  workers.  Many  manufac- 
turers maintained  stores  from  which  their  workmen  were 
required  to  purchase  their  food  and  clothing,  the  amount 
of  the  purchases  being  retained  out  of  wages.  This 
''trucking  system"  of  paying  wages  was  in  a  measure 
necessary  because  of  the  lack  of  currency,  but  it  gave  op- 
portunity for  grave  abuses  on  the  part  of  selfish  and  greedy 
employers. 

Other  textile  industries  of  the  Eastern  States  produced 
woolen,  linen  and  silk  materials.  The  value  of  the 
products  of  the  woolen  mills  was  less  than  one-half  the 
value  of  the  cotton  goods  produced.  The  manufacture  of 
silk  was  still  in  the  experimental  stage.  Leather,  paper, 
glass,  boots  and  shoes  and  other  articles  of  leather,  car- 
riages and  coaches,  and  furniture  were  among  the  im- 
portant products  of  Eastern  manufacturing  industries. 

Next  to  cotton  manufacture  the  production  of  iron  and 
of  finished  articles  of  iron  was  the  most  important  in- 
dustry. There  had  been  a  need,  from  earliest  colonial 
days,  for  farm  implements,  nails,  anchors,  firearms  and 
household  utensils,  which  American  iron  producers  had 
tried  in  part  to  meet.  Now  there  was  an  increasing  de- 
mand for  iron  not  only  for  the  long  customary  uses  but 
for  many  new  purposes.  The  machinery  of  the  new  textile 
mills  was  made  partly  of  iron;  steam  engines  for  use  on 
steamboats,  steam  locomotives,  stationary  engines  for  use 
in  mills  erected  where  water-power  was  not  available,  rail- 
road rails  and  railroad  cars  and  tools  of  all  kinds  repre- 
sented new  demands  foi*  iron.  It  was  at  this  time  that 
the  manufacture  of  iron  heating-stoves  and  cooking-stoves 
began  on  an  extensive  scale.  The  growing  iron  industry 
itself  created  a  need  for  great  mechanically  operated  ham- 
mers, anvils,  tongs,  engines  and  other  kinds  of  iron  equip- 


INDUSTRIAL  EXPANSION  295 

ment.     The  establishment  of  the  factory  system  introduced 
a  new  age  of  iron. 

New  methods  of  smelting  and  refining  iron  were  de- 
veloped both  in  England  and  in  the  United  States.  Some 
of  the  ores  of  Pennsylvania  and  New  York  were  of  suffi- 
cient purity  that  wrought  iron  could  be  made  directly 
from  the  ore  in  ''bloomeries. "  In  most  of  the  iron  ore 
there  was  so  much  carbon,  sulphur  and  other  foreign  sub- 
stances that  the  ore  was  reduced  in  blast  furnaces,  where 
it  was  converted  into  "pigs"  of  cast  iron.  These  pigs 
were  then  refined  in  forges,  where  by  repeated  heating 
and  hammering  or  "squeezing"  the  excess  carbon  was  ex- 
pelled from  the  brittle  cast  iron,  leaving  an  easily  work- 
able wrought-iron.  Very  little  steel  was  made  in  America 
partly  because  of  the  lack  of  the  necessary  skill  and  techni- 
cal knowledge  and  partly  because  of  the  difficulty  and  ex- 
pense of  the  processes  of  steel  making  then  known.  The 
"puddling-furnaces"  afforded  an  improved  method  of  re- 
fining the  pigs  of  cast  iron.  In  this  type  of  furnace  the 
iron  could  be  reduced  to  a  molten  state  without  being 
brought  into  direct  contact  with  the  fuel,  thus  making  it 
possible  to  expel  the  impurities  with  only  one  heating. 
The  puddling  process  was  introduced  from  England  about 
1817  and  its  use  was  gradually  adopted  in  all  the  iron 
producing  centers.  Refined  iron  was  sent  to  foundries, 
rolling  mills,  cutting  mills  and  forges  to  be  cast,  rolled, 
cut  or  forged  into  finished  products. 

Until  1840  charcoal  was  virtually  the  only  fuel  used  in 
smelting  and  refining  iron,  and  the  charcoal  burning  in- 
dustry was  closely  associated  with  the  iron  industry.  Some 
ironmasters  experimented  with  anthracite  coal,  with  mix- 
tures of  anthracite  coal  and  charcoal,  and  even  with  coke, 
but  their  early  efforts  to  use  these  fuels  did  not  meet  with 
much  success.     Moreover  there  was  a  prejudice  against  the 


296  INDUSTRIAL  EXPANSION 

use  of  mineral  coal,  it  being  thought  that  it  injured  the 
quality  of  the  iron. 

There  were  other  uses  for  anthracite  coal,  however, 
which  brought  about  a  greatly  increased  demand  for  it 
throughout  the  East.  It  was  used  for  household  purposes 
and  for  firing  steam  engines,  and  it  was  also  used  in  the 
iron  foundries  and  shops  where  finished  castings  and  forg- 
ings  were  made.  The  shipments  of  anthracite  coal  from 
the  Lehigh,  Schuylkill  and  Wyoming  districts  of  eastern 
Pennsylvania  mounted  from  365  tons  in  1820  to  684,000 
tons  in  1836.  Bituminous  coal  from  Virginia  and  Nova 
Scotia  was  sold  in  the  cities  of  New  England  and  the 
Middle  Atlantic  States,  and  imports  of  coal  from  England 
continued  to  enter  the  country. 

One  effect  of  the  development  of  manufacturing  was  the 
demand  for  better  artificial  light.  The  days  of  factory 
labor  began  long  before  dawn  and  ended  long  after  sun- 
set during  a  large  part  of  the  year.  The  whale-oil  lamps, 
sperm  and  tallow  candles,  and  other  old-fashioned  light- 
ing devices  were  not  adequate  for  factory  ligliting.  A 
great  improvement  came  with  the  introduction  of  coal-gas 
illumination.  Coal-gas  production  began  in  Boston  in  1821 
and  in  New  York  in  1822,  and  its  manufacture  soon  spread 
to  other  communities.  The  new  kind  of  illumination  was 
used  not  only  for  lighting  factories,  but  for  lighting  streets 
and  dwelling  houses.  The  manufacture  of  the  gas  created 
new  demands  for  iron  for  the  ovens,  tanks,  pipes  and  fit- 
tings used  in  production  and  distribution. 

The  Beginning  of  the  Labor  Movement.  The  factory 
sj'stem  brought  large  profits  to  many  investors,  and  it  also 
brought  large  losses,  because  of  fluctuating  market  condi- 
tions and  because  of  stock  speculation  and  mismanagement 
of  new  industries.  Workmen  found  their  employment  ir- 
regular; when  they  had  work  their  wages  were  compara- 
tively small  and  their  hours  of  work  excessive.     It  was 


INDUSTRIAL  EXPANSION  297 

inevitable  that  such  conditions  should  create  dissatisfac- 
tion. The  unrest  and  discontent  resulted  in  an  organized 
movement  among  the  workers  to  improve  the  conditions  of 
labor.  Shortly  after  the  beginning  of  the  nineteenth  cen- 
tury certain  printing  and  building  crafts  had  founded 
labor  organizations,  but  the  "labor  movement"  can  scarcely 
be  said  to  have  started  in  the  United  States  until  after 
the  factory  system  was  well  established. 

An  event  which  greatly  stimulated  the  labor  movement 
was  the  coming  of  Robert  Owen  to  the  United  States  in 
1824.  Owen  had  done  some  wonderful  work  in  the  im- 
provement of  the  conditions  of  labor  in  the  textile  mills 
of  New  Lanark  in  Scotland.  He  was  greatly  distressed 
by  the  abject  misery  and  poverty  of  the  great  mass  of 
factory  workers  in  England.  He  came  to  America  with 
the  idea  of  establishing  a  new  type  of  social  and  industrial 
organization  based  upon  community  cooperation.  He 
founded  a  model  community  at  New  Harmony,  Indiana, 
but  it  did  not  meet  with  success.  Notwithstanding  the 
failure  of  Owen's  communistic  experiment  his  teachings 
and  the  knowledge  of  the  work  he  had  accomplished  in 
New  Lanark  had  a  profound  effect  upon  the  American 
public.  Many  leading  citizens  endorsed  his  views  and  en- 
couraged the  organization  of  workers  as  a  means  of  better- 
ing the-  condition  of  the  laboring  population. 

There  was  a  general  demand  among  laborers  for  a  ten- 
hour  day,  increased  wages,  extension  of  the  suffrage,  a 
better  system  of  education  and  the  abolition  of  imprison- 
ment for  debt.  Labor  unions  were  organized  in  a  number 
of  industries,  and  in  1833  a  trade  union  council  was  held 
in  New  York  City.  The  workingmen  of  New  York  en- 
deavored to  enforce  their  desires  through  political  action, 
and  they  organized  a  party  which  had  a  candidate  for 
governor  in  the  election  of  1830.  The  following  year,  in 
combination  with  the  Whigs,  the  Workingmen 's  party  sue- 


298  INDUSTRIAL  EXPANSION 

ceeded  in  electing  a  few  members  of  the  New  York  legis- 
lature, an  event  which  created  considerable  excitement. 
In  1836  the  Workingmen's  party,  then  known  as  the  Loco- 
Foco  party,  supported  Van  Buren  for  the  presidency. 
Subsequently  President  Van  Buren  issued  an  executive 
order  prescribing  a  ten-hour  day  for  laborers  engaged 
in  government  work. 

Trade  of  the  Eastern  States;  Coastwise  Shipping.  A 
large  part  of  the  manufactured  products  of  the  Eastern 
States,  as  has  been  previously  indicated,  was  marketed  in 
the  Southern  and  Western  States.  The  merchants  of  the 
East  also  sent  to  the  West  and  South  most  of  the  imported 
goods  which  those  sections  consumed.  The  merchants, 
bankers  and  shipowners  of  the  East  conducted  the  business 
transactions  of  the  foreign  trade  of  the  United  States. 
The  imports  of  New  York  City  were  greater  than  the  im- 
ports of  all  other  seaports  of  the  United  States  combined, 
and  New  York  merchants  derived  much  profit  from  the 
distribution  of  imported  goods  to  the  markets  of  other 
States.  Traffic  between  the  East  and  the  South  was 
carried  on  in  coastwise  shipping,  and  with  the  increased 
consumption  of  Southern  cotton  in  Eastern  mills  and  the 
enlarged  demand  for  Eastern  manufactures  throughout  the 
South,  the  coastwise  trade  grew  even  more  rapidly  than 
the  trade  of  the  Mississippi  River.  There  is  little  exact 
information  available  concerning  the  volume  of  the  coast- 
wise trade  of  the  United  States.  In  keeping  statistics  of 
the  American  merchant  marine  the  Treasury  Department 
failed  to  deduct  each  year  the  tonnage  of  the  vessels  lost 
at  sea  or  worn  out.  For  this  reason  the  statistics  of  Ameri- 
can shipping  for  the  years  previous  to  the  Civil  War  are 
misleading,  and  the  exact  increase  of  tonnage  each  year 
cannot  be  ascertained.  Deductions  for  lost  ships  and  worn 
out  ships  were  made  in  a  lump  every  ten  or  twelve  years 
so  that  the  statistics  for  years  when  the  corrections  were 


INDUSTRIAL  EXPANSION  299 

made  seem  to  indicate  that  there  was  a  great  loss  in  ton- 
nage when  there  was  really  a  net  increase.  However,  the 
information  available  in  trade  journals  and  newspapers 
shows  that  there  was  a  steady  development  of  coastwise 
trade  after  1820.  Moreover  the  statistics  of  tonnage  for 
1830,  after  losses  for  a  period  of  more  than  ten  years  had 
been  deducted,  show  that  for  the  first  time  the  coastwise 
merchant  fleet  of  the  United  States  exceeded  in  tonnage 
the  merchant  shipping  engaged  in  foreign  trade. 

Foreign  Trade.  From  1820  to  1830  the  foreign  com- 
merce of  the  United  States  made  comparatively  little 
progress.  The  primary  interest  of  the  nation  was  internal 
development.  As  Prof.  Frederick  J.  Turner  has  said, 
"The  nation  was  building  an  empire  of  its  own  with  sec- 
tions which  took  the  place  of  kingdoms."  At  no  time  dur- 
ing this  decade  did  the  annual  value  of  the  imports  reach 
$100,000,000,  and  in  only  one  year  did  it  exceed  $90,- 
000,000.  About  one-third  of  the  imports  of  each  year  were 
reexported  to  foreign  markets.  There  was  a  steady  in- 
crease in  domestic  exports,  due  to  the  growth  of  the  cotton 
trade.  For  the  ten  year  period  there  was  an  excess  of  ex- 
ports of  only  $33,000,000,  which  was  more  than  balanced 
by  the  loans  contracted  abroad  through  the  sale  of  bonds 
for  internal  improvements. 

Beginning  with  1831  there  was  a  rapid  growth  in  the 
foreign  trade  of  the  United  States.  Both  exports  and  im- 
ports increased  in  amount  but  the  increase  of  imports  was 
much  greater  than  that  of  exports.  Many  reasons  existed 
for  the  sudden  expansion  of  the  import  trade.  In  part  it 
was  due  to  the  reduction  of  protective  tariff  duties,  though 
the  comparative  unimportance  of  this  cause  is  indicated 
by  the  fact  that  the  imports  which  showed  great  increases 
were  luxuries  such  as  silks  and  wines,  and  tropical  food- 
stuffs such  as  sugar,  and  not  manufactured  articles  which 
competed  with  American  made  products.     The  extensive 


300  INDUSTRIAL  EXPANSION 

borrowing  in  foreign  countries  was  also  a  cause  of  increas- 
ing imports.  The  mere  fact  that  credit  was  so  easily  ob- 
tainable in  Europe  tended  to  encourage  buying  by  Ameri- 
can merchants.  The  excess  of  imports  represented  in  part 
the  investment  of  foreign  capital  in  American  enterprises. 
Finallj^  the  five  years  preceding  1837  were  years  of  great 
speculative  activity.  There  was  a  curtailment  of  produc- 
tion in  some  branches  of  industry  and  a  general  advance 
in  the  consumption  of  luxuries  among  the  thousands  of 
people  who  believed  they  were  getting  rich  much  faster 
than  they  really  were.  Successful  speculation  is  usually 
accompanied  by  wasteful  extravagance.  The  total  imports 
rose  from  $103,000,000  in  1831  to  $189,000,000  in  1836, 
while  exports  advanced  from  $81,000,000  to  $129,000,000. 
The  foreign  purchases  caused  the  people  of  the  United 
States  to  become  heavily  involved  in  debt  again,  and  once 
more  became  a  cause  of  serious  economic  disturbance. 

Ocean  Shipping.  The  relative  stagnation  of  foreign 
trade  between  1820  and  1830  tended  to  check  the  develop- 
ment of  the  shipping  industry,  and  it  did  not  grow  as  it 
had  grown  during  the  years  of  the  Napoleonic  wars. 
However  the  protective  legislation  of  1817  gained  the  ad- 
mission of  American  ships  to  the  carrying  trade  of  foreign 
countries,  and  there  was  no  decline  of  the  shipping  busi- 
ness. Immigration  to  America  from  England,  Ireland  and 
the  countries  of  continental  Europe  gave  rise  to  a  large 
passenger  traffic  from  which  American  shipowners  derived 
large  profits. 

This  period  witnessed  the  establishment  of  a  number  of 
fast  sailing  "packet  lines"  between  the  United  States  and 
Europe.  The  first  regular  transatlantic  packet  line,  the 
Black  Ball  Line,  had  been  established  in  1816.  Previous 
to  that  time  there  had  been  little  effort  to  operate  vessels 
on  regular  schedules.  Ships  were  owned  by  merchants, 
and   sailings  occurred   whenever   cargoes   were   available. 


INDUSTRIAL  EXPANSION 


301 


The  increase  of  ocean  traffic  between  Europe  and  America 
made  it  possible  to  separate  the  shipping  business  from  the 
business  of  trading,  and  "common  carriers"  were  estab- 
lished on  ocean  routes.  Individuals  and  companies  ac- 
quired fleets  of  sailings  vessels,  announced  regular 
schedules  of  sailings,  and  carried  passengers  and  what- 
ever freight  was  offered. 

Ocean  vessels  of  large  size  and  better  sailing  qualities 
were  constructed.     Double-decked  vessels  of  800  tons  and 


/ 

fm    ^^^^Mm 

Kill   fm  ' 

/■^atoiiSl 

'    ^"^     ^^^^fc    -^ 

""   '^-  '--^iSfe 

Model  of  the  Savannah 
Courtesy  of  U.  S.  National  Museum. 

more  made  their  appearance  in  transatlantic  trade. 
Boston,  New  York,  Philadelphia  and  Baltimore  were  im- 
portant shipbuilding  centers.  In  1819  a  New  York  firm 
installed  an  engine  in  a  sailing  vessel,  the  Savannah,  and 
operated  it  under  steam  nearly  all  the  way  from  Savannah 
to  Liverpool.  This  feat  was  regarded  with  much  wonder 
in  Europe,  and  fhe  vessel  was  taken  to  several  ports  and 
placed  on  exhibition  as  the  "first  steamboat  to  cross  the 
Atlantic."     Its  owners  did  not  seriously  consider  the  pos- 


302  INDUSTRIAL  EXPANSION 

sibilities  of  steam  transportation  on  the  ocean  and  soon  re- 
moved the  engine  from  the  ship.  In  1833  a  steamship,  the 
Royal  William,  crossed  the  Atlantic  from  Quebec  to  Liv- 
erpool, all  the  way  under  steam.  This  event  convinced 
English  shipowners  that  transatlantic  steamboat  naviga- 
tion was  entirely  feasible,  and  in  1837  the  first  steamship 
designed  for  regular  transatlantic  service,  the  Great 
Western,  was  launched  at  Bristol.  The  initial  trip,  made 
the  following  year,  marked  the  beginning  of  a  new  era  in 
ocean  transportation. 

Shipping  Reciprocity.  The  abolition  in  1815  of  dis- 
criminating tariff  and  tonnage  taxes  in  the  direct  foreign 
trade  of  the  United  States  had  met  with  such  favor  that 
from  time  to  time  it  had  been  suggested  that  the  prin- 
ciple of  reciprocity  in  shipping  duties  be  extended  to  in- 
clude the  indirect  trade.  American  shipowners  were  re- 
quired to  pay  out  each  year  many  thousands  of  dollars  in 
foreign  ports  because  of  high  tariff  and  tonnage  duties. 
Since  more  than  ninety  per  cent  of  the  foreign  trade  of 
the  United  States  was  carried  in  our  own  ships  our  Gov- 
ernment obtained  but  little  extra  revenue  from  the  dis- 
criminating duties  imposed  on  foreign  ships.  The  dis- 
criminating duties  gave  little  protection  to  the  shipping 
business,  and  they  occasionally  caused  much  inconvenience. 
Ships  of  all  countries  were  frequently  forced  to  make 
voyages  in  ballast  to  avoid  the  payment  of  excessive  duties 
which  would  have  absorbed  the  profits  obtained  if  cargoes 
had  been  carried.  By  producing  this  effect  the  policy  of 
discrimination  added  to  the  expense  of  operating  ships  and 
caused  freight  charges  to  be  higher  than  they  otherwise 
might  have  been.  In  1828  Congress  enacted  a  law  abolish- 
ing all  discriminating  duties  imposed  on  the  vessels  of 
those  countries  which  would  agree  not  to  levy  any  dis- 
criminating taxes  whatever  on  the  vessels  of  the  United 


INDUSTRIAL  EXPANSION  303 

States.     The   offer  was   readily   accepted   by  the  leading 
maritime  nations  of  Europe. 

The  abolition  of  discriminating  duties  abroad  opened  a 
wide  field  for  American  ships,  and  the  increase  of  the 
foreign  trade  of  the  United  States  after  1830  likewise  en- 
larged the  opportunities  of  American  shipowners,  who 
entered  upon  a  period  of  unprecedented  prosperity.  Ves- 
sels could  be  built  cheaply  in  America  and  our  seamen 
were  without  equal.  During  the  six  years  following  1830 
the  merchant  shipping  of  the  United  States  engaged  in 
foreign  trade  increased  on  the  average  more  than  ten  per 
cent  each  year.  Continuing  its  growth  thereafter  our  mer- 
chant fleet  at  the  beginning  of  the  Civil  War  was  larger 
than  the  merchant  fleet  of  any  other  nation. 

Questions  and  Topics 

1.  "What  additions  have  been  made  to  the  three  great 
economic  sections  of  the  United  States,  as  classified  in  the 
early  19th  century? 

2.  Expand  the  sketch  of  Lincoln's  boyhood  and  youth  by 
adding  details  selected  from  one  or  two  of  his  biographies. 

3.  What  natural  resources  of  the  Eastern  States  made 
feasible  the  manufacture  of  leather,  paper,  glass,  shoes, 
carriages,  furniture  and  cook  stoves? 

4.  Selecting  one  article,  show  how  its  manufacture  en- 
tails the  manufacture  of  numerous  other  articles. 

5.  Make  a  list  of  various  products  that  are  used  for 
fuel  in  other  countries. 

6.  Compare  the  demands  of  the  laborers  in  1830  with 
the  demands  of  laborers  today. 

7.  Trace  the  improvements  in  lighting  from  the  dis- 
covery of  America  to  the  present  day,  and  point  out  some 
of  the  social  and  economic  results  of  the  improvements. 

8.  List  all  the  causes  that  contributed  to  the  commercial 
supremacy  of  New  York  before  1830. 

9.  How  can  you  account  for  the  fact  that  ocean  steam- 
ships were  not  built  until  some  time  after  river  steam- 
boats were  used? 


CHAPTER  XVI 
CURRENCY   AND    BANKING;    THE    PANIC   OF    1837 

Prosperity  and  Speculation.  The  years  from  1830  to 
1835  were  years  of  great  prosperity  in  the  United  States. 
In  all  branches  of  industry  there  was  much  activity  and 
progress ;  many  new  enterprises  were  successfully  started ; 
there  was  a  rapid  expansion  of  national  wealth.  As  has 
often  happened,  however,  rapid  expansion  bred  a  spirit 
of  speculation,  and  many  persons,  in  the  eager  pursuit  of 
riches,  overreached  themselves.  Once  more  there  was  a 
great  expansion  of  credit,  and  the  people  of  the  United 
States  became  loaded  with  debts  which  they  could  not  pay. 
The  inevitable  collapse  ensued  in  1837,  and  the  country 
passed  through  another  great  industrial  and  financial 
crisis. 

One  of  the  causes  of  the  panic  of  1837  was  a  disordered 
banking  and  currency  system.  A  financial  crisis  of  an  en- 
tire people  is  something  like  the  financial  crisis  of  a  single 
individual ;  it  is  the  result  of  an  expansion  of  credit,  the 
accumulation  of  debts  that  cannot  be  paid,  an  excess  of 
liabilities  over  present  or  immediately  prospective  assets. 
A  national  crisis  may  come  without  any  derangement  of 
the  banking  and  currency  system.  The  crises  of  1785-86 
and  of  1819  would  probably  have  occurred  however  sound 
a  system  of  banking  and  currency  the  country  might  have 
had.  But  since  the  beginning  of  the  nineteenth  century 
all  financial  crises  have  been  closely  related  to  the  condi- 
tions of  the  banking  business,  and  as  a  matter  of  fact, 
unsound  banking  practice  has  been  one  of  the  primary 
causes  of  financial  disturbances.     This  has  been  true  be- 

304 


THE  PANIC  OF  1837  305 

cause  since  the  early  years  of  the  nineteenth  century  credit 
operations  in  business  have  been  conducted  largely  through 
banking  institutions  rather  than  directly  between  indivi- 
duals. Bank  credit  superseded  ordinary  book  credit. 
Whereas  formerly  a  merchant  bought  directly  on  credit 
from  a  wholesaler,  he  now  borrowed  credit  at  the  bank 
to  make  his  purchases.  Or  the  wholesaler  might  trust 
his  customers  directly,  and,  on  the  strength  of  the  sums 
due  him,  borrow  funds  at  the  bank  to  finance  his  business 
operations.  In  other  words  business  men  exchanged  their 
own  credit  for  the  credit  of  the  bank.  The  evidences  of 
bank  credit  were  more  acceptable;  and  the  banks  were 
convenient  and  effective  agencies  for  the  collection  and 
payment  of  obligations. 

During  the  first  half  of  the  nineteenth  century  much 
of  the  bank  credit  took  the  form  of  bank-notes.  These 
were  the  banks'  promises  to  pay  certain  sums,  given  to 
borrowers  in  exchange  for  their  notes.  The  bank-notes 
were  payable  to  the  bearer  and  were  placed  in  circulation 
by  the  borrower.  Sound  banking  practice  required  that  a 
bank  be  always  ready  to  redeem  its  notes  in  specie.  When 
a  bank  made  unwise  loans  in  large  amounts  it  was  unable 
to  collect  from  its  debtors  and  was  consequently  unable 
to  redeem  its  notes.  Whoever  held  such  irredeemable  notes 
was  a  loser.  Bank  credit  also  took  the  form  of  deposits. 
The  borrower  gave  his  note  to  the  bank  and  received  credit 
for  a  certain  sum  on  the  books  of  the  bank.  Such  credit 
could  be  transferred  from  one  individual  to  another  by 
means  of  checks  and  drafts.  If  a  bank  made  unsound 
loans  it  became  unable  to  pay  its  depositors'  claims,  and 
the  effect  was  just  the  same  as  when  the  evidence  of  the 
bank  credit  was  in  the  form  of  bank-notes.  With  this 
brief  explanation  of  how  banking  became  related  to  com- 
mercial transactions  and  of  the  manner  in  which  unsound 
banking  may  result  in  the  improper  inflation  of  credit  we 


306  THE  PANIC  OF  1837 

shall  observe  what  happened  in  the  United  States  between 
1830  and  1837. 
Andrew  Jackson  and  the  Second  United  States  Bank. 

In  his  first  message  to  Congress  after  becoming  President, 
Andrew  Jackson  raised  the  question  of  the  constitutional- 
ity of  the  United  States  Bank,  and,  asserting  that  the  Bank 
had  "failed  in  the  great  end  of  establishing  a  uniform  and 
sound  currency,"  suggested  that  Congress  should  begin  to 
consider  the  propriety  of  renewing  the  Bank's  charter 
which  was  to  expire  in  1836.  In  reply  to  this  message  the 
Committee  on  Ways  and  Means  of  the  House  of  Repre- 
sentatives expressed  satisfaction  with  the  record  of  the 
Bank  and  asserted  that  it  had  been  a  highly  valuable  in- 
stitution which  was  worthy  of  continued  existence.  In  his 
second  annual  message  in  1830  Jackson  again  expressed 
some  doubt  as  to  the  advisability  of  rechartering  the  Bank. 

Jackson's  aversion  to  the  Bank  at  this  time  had  two 
reasons  back  of  it.  He  had  a  profound  distrust  of  all 
paper  currency,  a  distrust  based  upon  the  unhappy  experi- 
ence of  the  people  of  the  United  States  and  especially  of 
the  people  of  the  West  where  Jackson  had  lived.  In  the 
second  place  he  doubted  the  wisdom  of  giving  to  a  private 
corporation  a  virtual  monopoly  of  the  issue  of  paper  cur- 
rency. He  saw  that  an  intimate  relation  existed  between 
the  level  of  prices  and  the  amount  of  currency  in  the 
country.  If  the  currency  consisted  largely  of  paper,  an 
institution  which  could  almost  at  will  reduce  or  increase 
the  amount  of  currency  in  circulation  was  in  a  position  to 
exercise  a  large  measure  of  control  over  the  business  activi- 
ties of  the  nation. 

There  has  been  much  discussion  of  what  Jackson  meant 
in  saying  that  the  Bank  had  failed  in  the  great  end  of 
establishing  a  uniform  and  sound  currency.  After  the 
management  of  the  Bank  was  changed  in  1819  it  had  pur- 
sued a  policy  of  safety  and  conservatism.     Not  only  had 


THE  PANIC  OF  1837 


307 


Its  notes  always  been  promptly  redeemable  in  specie,  but  it 
had,  by  refusing  to  accept  the  notes  of  non-specie  paying 
State  banks,  virtually  compelled  all  rival  banks  to  follow 
the  ordinary  rules  of  safe  banking.  What  Jackson  prob- 
ably meant  by  his  remark  was  that  the  Bank  had  not 
brought  about  the  general  use  of  gold  and  silver  currency. 
Jackson  was  a  believer  in  "hard  money."  He  thought 
that  bank-notes  should  not  be  issued  at  all  if  their  use 


Henry  Clay 

could  possibly  be  avoided.  At  most  only  notes  of  large 
denomination  should  be  issued.  He  wanted  to  restore  the 
"money  of  the  Constitution."  He  felt  that  the  Bank  had 
purposely  refrained  from  trying  to  compel  the  use  of  gold 
and  silver,  and  that  it  had  preserved  a  paper  currency 
which  it  could  manipulate  to  its  own  advantage  and  often 
to  the  disadvantage  of  the  people. 
"Whatever  he  meant  by  his  remark  about  the  Bank  in 


308 


THE  PANIC  OF  1837 


his  message  of  1829  Jackson  certainly  showed  a  dislike 
for  the  Bank  during  the  first  two  years  of  his  presidency. 
He  was  amenable  to  reason,  however,  and  there  is  some 
evidence  to  show  that  by  1831  he  had  overcome  whatever 
prejudice  he  might  have  had  against  the  Bank  and  was 
willing  to  give  favorable  consideration  to  the  eventual 
renewal  of  its  charter.  Had  the  question  of  rechartering 
not  been  made  a  political  issue  by  Jackson's  enemies  the 
Bank  might  have  continued  its  existence. 


Andrew  Jackson 

In  1831  the  National  Republican  party  named  Henry 
Clay  as  its  candidate  for  the  presidency,  and  in  its  plat- 
form— the  first  "platform"  ever  issued  by  a  political  party 
in  the  United  States — declared  that  Jackson  was  pledged 
to  veto  any  bill  which  might  be  passed  for  rechartering  the 
Bank.  Clay's  supporters  then  induced  Nicholas  Biddle, 
the  president  of  the  Bank,  to  petition  for  a  renewal  of  the 
Bank's  charter.     Many  of  Jackson's  friends  and  support- 


THE  PANIC  OF  1837  309 

ers  were  heartily  in  favor  of  rechartering  the  Bank,  and 
they  warned  Biddle  against  endeavoring  to  make  the  Bank 
a  campaign  issue.  The  Bank's  original  charter  had  four 
years  to  run  and  it  was  not  necessary  to  take  up  the 
question  of  rechartering  .so  early.  Biddle  knew  that  Clay 
would  support  the  Bank's  cause;  he  had  good  reason  to 
be  doubtful  of  Jackson,  Notwithstanding  the  warnings 
of  Jackson's  friends,  he  and  Clay's  adherents  succeeded  in 
pushing  through  Congress  the  bill  to  recharter  the  Bank. 
Then  they  virtually  dared  Jackson  to  use  his  veto  power. 
They  hoped,  in  fact,  that  he  would  veto  the  bill,  because 
they  thought  that  such  an  act  would  bring  about  his  defeat 
at  the  polls  in  November,  Jackson  did  not  disappoint 
them.  He  was  not  the  kind  of  man  to  shun  a  fight  which 
was  forced  upon  him.  Convinced  now  that  the  Bank  was 
not  only  a  mischievous  institution  from  an  economic  stand- 
point but  also  a  powerful  and  corrupt  political  influence 
which  was  trying  to  keep  Andrew  Jackson  from  being  re- 
elected, he  vetoed  the  bill  to  recharter  without  the  slightest 
hesitation,  denouncing  the  Bank  and  all  its  works  in  un- 
sparing terms.  Biddle  was  greatly  pleased.  But  his  pleas- 
ure turned  to  astonishment  and  dismay  in  November  when 
Jackson  won  an  overwhelming  victory.  The  days  of  the 
Bank  were  numbered. 

The  Removal  of  the  Government  Deposits.  Feeling 
that  the  "sovereign  people"  had  fully  endorsed  his  stand 
against  the  Bank,  Jackson  resolved  to  terminate  its  rela- 
tion with  the  Treasury.  In  a  paper  submitted  to  his  Cab- 
inet in  September,  1833,  he  presented  his  reasons  for  dis- 
continuing the  use  of  the  Bank  as  the  fiscal  agent  of  the 
Government.  More  than  half  the  members  of  his  Cabinet 
opposed  his  views,  but  Jackson  was  in  a  vindictive  mood 
and  determined  to  punish  and  humiliate  his  enemies.  Ac- 
cording to  the  law  the  Secretary  of  the  Treasury  had  the 
right  to  select  the  banks  in  which  the  Government's  money 


310  THE  PANIC  OF  1837 

should  be  deposited.  Jackson  suggested  to  his  Secretary 
of  the  Treasury,  Louis  McLane,  that  he  remove  the  money 
which  the  Government  had  on  deposit  with  the  Bank,  but 
McLane  did  not  think  it  wise  to  take  such  action.  McLane 
was  then  appointed  Secretary  of  State  and  William  J. 
Duane  made  head  of  the  Treasury  Department.  Though 
Duane  was  not  friendly  to  the  Bank  and  was  opposed  to 
its  recharter,  he  thought  that  the  removal  of  the  deposits 
would  be  a  violation  of  the  contract  existing  between  the 
Government  and  the  Bank,  and  he  too  refused  to  carry  out 
Jackson's  wishes.  He  was  promptly  removed  from  office 
and  Roger  B.  Taney  appointed  in  his  place.  Taney  did  not 
transfer  the  money  which  the  Government  had  in  the  Bank, 
but  he  ordered  that  no  more  public  funds  be  deposited  with 
that  institution.  The  Government  funds  which  the  Bank 
held  were  soon  exhausted  through  ordinary  Treasury  dis- 
bursements, and  Jackson's  desire  was  accomplished.  A 
number  of  State  banks  were  selected  as  depositories  for  the 
Government  money.  These  banks — "Jackson's  pet  banks" 
they  were  called — performed  for  the  Treasury  the  fiscal 
duties  previously  entrusted  to  the  United  States  Bank. 
Biddle  obtained  a  new  charter  for  the  Bank  from  the 
State  of  Pennsylvania,  and  when  the  Federal  charter  ex- 
pired in  1836  the  institution  continued  in  business  as  a 
State  bank. 

Revision  of  the  Coinage  System.  In  furtherance  of 
Jackson's  desire  to  restore  the  "money  of  the  Constitu- 
tion" Congress  proceeded  to  revise  the  coinage  system. 
In  Chapter  X  it  was  told  how  the  coinage  act  of  1792 
had  failed  to  meet  the  expectations  of  Congress  and  how 
its  only  tangible  result  had  been  the  addition  of  a  rela- 
tively small  number  of  fractional  coins  to  the  currency. 
In  1834  a  new  coinage  law  was  passed;  it  was  slightly 
modified  in  1837.  Under  the  new  law  23.22  grains  of 
gold  were   made  the   equivalent   of   a   dollar  instead   of 


THE  PANIC  OF  1837  311 

24.75  grains.  The  amount  of  pure  silver  in  a  dollar  was 
kept  at  37114  grains,  though  the  weight  of  the  silver 
dollar  was  reduced  from  416  grains  to  4121/2  grains  by 
decreasing  the  amount  of  alloy.  The  ratio  between  gold 
and  silver  was  thus  fixed  at  15.98  to  1  instead  of  15  to  1. 
This  law  overvalued  gold,  just  as  the  former  law  had  over- 
valued silver.  In  the  bullion  market  the  ratio  of  silver  to 
gold  had  come  to  be  15.625  to  1.  iThis  meant  that  a  per- 
son owning  $100  in  silver  coin  could  melt  it  down,  export 
it,  and  obtain  in  exchange  gold  bullion  which  would  have  a 
coinage  value  of  a  little  more  than  $102.  V  The  result  of 
this  law  was  the  immediate  exportation  of  whatever  silver 
dollars  were  coined  and  also  of  the  full-weight  fractional 
silver  coins.  For  the  first  time  a  considerable  number  of 
gold  coins  entered  the  circulating  medium  of  the  United 
States.  The  silver  coins  in  circulation  consisted  of  worn 
and  abraded  domestic  coins  and  a  large  number  of  Mexi- 
can, Spanish,  Portuguese  and  other  foreign  coins. 

The  laws  of  1834  and  1837  are  usually  referred  to  as  laws 
for  the  "debasement  of  the  coinage,"  inasmuch  as  individ- 
uals possessing  coins  of  the  old  standard  could  convert 
them  into  a  larger  number  of  coins  of  equal  debt-paying 
power,  /a  person  having  100  ten-dollar  gold  pieces  could 
convert  then  into  coins  having  a  value  of  nearly  $1066,  and 
a  person  having  a  thousand  dollars  in  silver  coin  could 
exchange  it  for  gold  bullion  convertible  into  coins  with  a 
value  of  about  $1023.  *  Since  there  were  virtually  no  gold 
coins  in  circulation  in  1834,  no  domestic  silver  dollars, 
and  comparatively  few  full-weight  fractional  silver  coins 
the  effect  of  the  "debasement"  was  of  minor  importance. 

The  revision  of  the  coinage  system  did  not  accomplish 
President  Jackson's  purpose.  Even  had  a  proper  ratio 
between  gold  and  silver  been  adopted  the  disorder  of  the 
currency  could  not  have  been  avoided  without  stringent 
regulation    of    the    banking    business.     Jackson    certainly 


312  THE  PANIC  OF  1837 

meant  well  in  bringing  about  the  destruction  of  the  United 
States  Bank,  but  as  events  proved,  his  remedy  produced 
much  worse  effects  than  the  disease  with  which  he  thought 
the  country  was  afflicted. 

The  Operations  of  the  State  Banks.  At  the  time  of  the 
removal  of  the  deposits  from  the  United  States  Bank  the 
State  laws  for  the  regulation  of  banking  were  wholly  inad- 
equate. The  United  States  Bank  had  exercised  a  whole- 
some influence  on  State  banking,  but  now  that  this  influ- 
ence was  removed  there  was  a  rapid  increase  in  the  num- 
ber of  the  State  banks.  In  the  absence  of  effective  regu- 
lation many  of  these  banks  began  to  indulge  in  extremely 
unwise  practices.  Banks  were  started  with  little  capital 
and  little  specie.  They  printed  notes  in  large  quantities 
and  made  generous  loans  on  highly  speculative  enterprises. 
Between  1829  and  1837  the  number  of  banks  in  the  coun- 
try increased  from  329  to  788.  The  capital  of  the  banks 
advanced  from  $110,000,000  to  $290,000,000,  while  their 
loans  advanced  from  $137,000,000  to  $525,000,000  and 
their  note  circulation  from  $48,000,000  to  $149,000,000. 

Speculation.  Unsound  banking  invited  and  encouraged 
speculation.  The  country  was  seized  with  a  speculative 
mania.  One  of  the  chief  objects  of  speculation  was  the 
public  land  of  the  West.  In  1820  Congress  passed  a  law 
requiring  cash  payment  for  all  public  lands  and  placing  the 
minimum  price  at  $1.25  an  acre.  The  land  agents  of  the 
Government  could  under  the  law  accept  the  notes  of  the 
United  States  Bank  in  payment  for  land.  Inasmuch  as 
the  notes  of  State  banks  were  also  readily  payable  in  specie 
most  of  the  time  between  1820  and  1833,  the  land  agents 
accepted  bank-notes  without  discrimination,  depositing 
them  to  the  credit  of  the  Government  in  branches  of  the 
United  States  Bank.  After  the  United  States  Bank  suc- 
cumbed  to   Jackson's   attacks,   the   land   agents  unfortu- 


THE  PANIC  OF  1837  313 

nately  continued  their  customary  policy  of  accepting  all 
varieties  of  bank-notes.  Land  jobbers  and  speculators,  in 
collusion  with  mushroom  banks  and  even  with  the  aid  of 
the  banks  which  Jackson  selected  as  depositories  for  the 
public  funds,  bought  large  quantities  of  public  lands  and 
paid  for  them  with  new  bank-notes.  The  results  were 
bad.  As  Jackson  said  in  a  message  to  Congress,  "It  was 
perceived  that  the  receipts  arising  from  the  sales  of  public 
lands  were  increasing  to  an  unprecedented  amount.  In 
effect,  however,  the  receipts  amount  to  nothing  more  than 
credits  in  bank.  The  banks  lent  out  their  notes  to  specu- 
lators. They  were  paid  to  the  receivers  [land  agents]  and 
immediately  returned  to  the  banks,  to  be  lent  out  again 
and  again,  being  merely  instruments  to  transfer  to  specu- 
lators the  most  valuable  public  lands  and  pay  the  Govern- 
ment by  a  credit  on  the  books  of  the  banks.  .  .  .  The  spirit 
of  expansion  and  speculation  was  not  confined  to  the  de- 
posit banks,  but  pervaded  the  whole  multitude  of  banks 
throughout  the  Union."  The  receipts  from  the  sale  of 
public  lands,  which  amounted  to  $1,880,000  in  1830  reached 
$12,564,000  in  1835  and  $20,075,000  in  1836. 

Land  speculation  was  accompanied  by  other  kinds  of 
speculation,  also  encouraged  by  the  banks.  Large  sums 
were  invested  in  visionary  schemes  of  internal  improve- 
ments, which  were  destined  from  the  beginning  to  yield 
little  return.  State  legislatures  were  equally  guilty  with 
individuals  in  promoting  unworthy  enterprises.  Many 
States  loaned  their  credit  to  unsound  banks,  receiving  in 
exchange  large  quantities  of  bank-notes  to  be  placed  in 
circulation.  The  States  borrowed  large  sums  of  money 
abroad.  By  1837  the  debts  of  the  States  amounted  to 
$170,000,000,  much  of  the  money  having  been  sunk  in  pro- 
jects which  turned  out  to  be  worthless.  The  law  enacted 
in  1836  for  the  distribution  of  the  Federal  surplus  only 


314  THE  PANIC  OF  1837 

served  to  stimulate  the  excesses  of  *he  State  legislatures 
and  caused  them  to  squander  money  at  a  more  rapid  rate 
than  before. 

The  "easy  money"  and  the  "get  rich  quick"  fever 
created  a  spirit  of  extravagance  and  waste  which  was 
soon  reflected  in  excessive  purchases  of  foreign  goods, 
particularly  of  luxuries  for  immediate  consumption.  The 
imports  of  silk,  which  amounted  in  value  to  $5,932,000  in 
1831,  reached  $10,998,000  in  1834  and  $22,980,000  in 
1836.  There  were  large  increases  also  in  the  imports  of 
wines  and  sugar.  The  large  imports  were  purchased 
abroad  on  credit  and  sold  on  credit  to  consumers  in  the 
United  States. 

The  bubble  of  credit  became  larger  and  larger.  Prom- 
ises to  pay  millions  of  dollars  existed,  and  in  most  cases 
there  was  little  behind  the  promises,  too  frequently  not 
even  the  intention  or  desire  to  pay.  It  was  only  a  ques- 
tion of  time  until  the  bubble  would  burst. 

The  Crop  Failure  of  1835.  An  event  which  hastened 
the  financial  collapse  was  a  shortage  of  the  grain  crop 
throughout  the  United  States  in  1835.  The  shortage  was 
due  chiefly  to  bad  weather,  though  the  diversion  of  labor 
from  farm  work  to  the  construction  of  internal  improve- 
ments and  to  other  speculative  enterprises  was  in  a  meas- 
ure responsible.  The  quantity  of  wheat  produced  was  so 
small  that  in  1836  European  wheat  was  imported  into  the 
United  States  at  a  price  of  about  two  dollars  a  bushel. 
The  failure  of  the  crops  made  it  impossible  for  farmers  to 
pay  the  speculators  from  whom  they  had  bought  lands, 
and  the  merchants  who  had  sold  the  farmers  large  quanti- 
ties of  goods  on  credit  were  likewise  unable  to  collect  their 
bills.  Speculators  and  merchants  were  accordingly  unable 
to  pay  their  loans  at  the  banks.  For  a  time  the  banks  ex- 
tended more  credit,  but  this  only  postponed  the  day  of 
general  liquidation.     As  long  as  the  bank-notes  in  circu- 


THE  PANIC  OF  18B7  315 

lation  maintained  their  nominal  value  the  crisis  would  be 
delayed.  But  if  people  once  lost  confidence  in  the  bank- 
notes there  would  be  at  once  a  general  demand  for  specie 
on  the  part  of  depositors  and  holders  of  notes.  Such  a 
demand  would  at  once  reveal  the  unsound  condition  of  the 
banks  and  cause  a  panic. 

Late  in  1835  a  disastrous  fire  occurred  in  New  York  City 
destroying  nearly  $20,000,000  worth  of  property.  This 
sum  was  added  to  those  liabilities  for  which  there  were 
no  corresponding  assets. 

The  Specie  Circular.  In  the  summer  of  1836  President 
Jackson  took  a  step  which  did  much  to  destroy  public  con- 
fidence in  the  paper  currency.  He  was  alarmed  by  the  ex- 
pansion of  credit  and  the  excessive  issues  of  paper  cur- 
rency, and  he  also  felt  much  concern  because  the  Govern- 
ment held,  in  exchange  for  much  of  the  public  land  which 
had  been  sold,  only  large  credits  in  a  number  of  banks.  In 
order  to  check  speculation  in  lands  and  save  the  Govern- 
ment from  the  danger  of  greater  loss  he  caused  the  famous 
"Specie  Circular"  to  be  issued  on  July  11.  This  circular 
stated  that  all  payments  for  public  land  must  be  in  specie, 
exception  being  made  for  a  short  time  in  favor  of  pur- 
chasers who  intended  actually  to  settle  upon  the  lands 
which  they  bought.  Since  the  Government  had  not  been 
selling  land  on  credit  this  circular  did  not  cause  an  im- 
mediate "run"  on  the  banks.  It  did  tend  to  check  land 
speculation  and  caused  a  fall  in  the  prices  of  the  land, 
which  speculators  were  <holding  for  sale  at  a  profit.  More- 
over the  specie  circular  aroused  suspicion  concerning  the 
value  of  the  paper  currency.  If  the  Government  refused 
the  current  bank-notes,  individuals  were  not  likely  to  ac- 
cept them  readily.  New  purchasers  of  public  lands  were 
forced  to  demand  specie  from  the  banks. 

Foreign  Credits  Withdrawn.     The  crop  failure  of  1835 
and  the  large  increase  of  foreign  imports  created  a  heavy 


316  THE  PANIC  OF  1837 

balance  of  trade  against  the  United  States.  American 
drafts  and  bills  of  exchange  began  to  sell  at  a  discount  in 
England.  When  the  fall  in  exchange  occurred  the  Bank  of 
England  immediately  raised  its  discount  rates.  This  not 
only  served  as  a  warning  to  English  exporters  to  curtail 
their  credits  to  America,  but  also  caused  them  to  demand 
payment  of  the  obligations  outstanding.  All  English 
firms  that  had  sold  heavily  to  American  customers  asked 
for  a  settlement.  Since  the  exports  of  the  United  States 
were  much  too  small  to  create  a  foreign  credit  balance 
sufficient  to  meet  the  debts  owed  on  account  of  imports, 
American  importers  were  forced  to  seek  specie  with  which 
to  pay  their  English  creditors.  This  at  once  precipitated 
the  crisis. 

The  Panic.  The  demands  made  by  the  English  ex- 
porters upon  their  American  customers  started  a  demand 
for  settlement  all  along  the  line  of  credit.  The  American 
importers  asked  paj-ment  from  the  dealers  to  whom  they 
had  sold  goods;  the  dealers  demanded  payment  of  their 
customers.  There  was  a  general  scramble  to  get  hard 
money  from  the  banks.  The  bankers  immediately  called 
upon  their  debtors  for  payment,  but  of  course  they  could 
obtain  nothing  from  the  speculators  whose  notes  they  held. 
Since  the  American  importers  could  not  collect  their  debts 
they  could  not  pay  their  English  creditors.  Three  great 
mercantile  houses  in  London,  known  as  the  three  W's, 
Wildes,  Wiggins  and  Wilson,  whose  chief  assets  were  the 
debts  owed  them  by  American  importers,  failed  with  a 
loss  of  many  millions  of  dollars.  Their  failure  immediately 
caused  the  failure  of  dozens  of  English  manufacturers 
and  merchants  from  whom  goods  had  been  obtained  to  ex- 
port to  America.  A  panic  seized  England  and  general 
liquidation  set  in  there.  This  at  once  made  matters  worse 
in  the  United  States.  When  the  English  cotton  mills  closed 
down  the  demand  for  American  cotton  fell  off,  causing  the 


THE  PANIC  OF  1837  317 

ruin  of  hundreds  of  cotton  planters  and  dozens  of  Southern 
banks.  The  failure  of  the  planters  brought  added  distress 
to  the  "Western  farmers,  and  the  ruin  of  planter  and  farmer 
was  a  source  of  disaster  to  the  Eastern  manufacturer. 
Business  came  to  a  complete  standstill.  In  May,  1837, 
every  bank  in  the  United  States  suspended  specie  payment, 
and  the  notes  of  many  of  them  became  utterly  worthless. 
In  many  instances  the  original  capital  of  the  bank  was  ex- 
hausted and  depositors  and  note-holders  obtained  nothing. 
The  losses  were  enormous. 

In  a  message  to  Congress  in  September,  1837,  President 
Van  Buren  summed  up  the  situation.     He  said, 

''The  history  of  trade  in  the  United  States  for  the 
last  three  or  four  years  affords  the  most  convincing 
evidence  that  our  present  condition  is  chiefly  to  be  at- 
tributed to  overaction  in  all  the  departments  of  business 
— an  overaction  deriving,  perhaps,  its  first  impulses  from 
antecedent  causes,  but  stimulated  to  its  destructive  con- 
sequences by  excessive  issues  of  bank  paper  and  by  other 
facilities  for  the  acquisition  and  enlargement  of  credit. 
At  the  commencement  of  the  year  1834  the  banking 
capital  of  the  United  States,  including  that  of  the 
national  bank,  amounted  to  about  $200,000,000,  the  bank- 
notes then  in  circulation  to  about  $95,000,000  and  the 
loans  and  discounts  of  the  banks  to  $324,000,000.  Be- 
tween that  time  and  the  first  of  January,  1836,  being 
the  latest  period  to  which  accurate  accounts  have  been 
received,  our  banking  capital  was  increased  to  more 
than  $251,000,000,  our  paper  circulation  to  more  than 
$140,000,000  and  the  loans  and  discounts  to  more  than 
$457,000,000.  To  this  vast  increase  are  to  be  added 
the  many  millions  of  credits  acquired  by  means  of  for- 
eign loans,  contracted  by  the  States  and  State  institu- 
tions, and,  above  all,  by  the  lavish  accommodations  ex- 
tended by  foreign  dealers  to  our  merchants. 

"The  consequences  of  this  redundancy  of  credit  and 
of  the  spirit  of  reckless  speculation  engendered  by  it 
were  a  foreign  debt  contracted  by  our  citizens  estimated 
in  March  last  at  more  than  $30,000,000;  the  extension 


318  THE  PANIC  OF  1837 

to  traders  in  the  interior  of  the  country  of  credits  for 
supplies  greatly  beyond  the  wants  of  the  people;  the 
investment  of  $39,500,000  in  unproductive  public  lands 
in  the  years  1835  and  1836,  while  in  the  preceding  years 
the  sales  amounted  to  only  four  and  a  half  millions; 
the  creation  of  debts,  to  an  almost  countless  amount,  for 
real  estate  in  existing  and  anticipated  cities  and  vil- 
lages, equally  unproductive,  and  at  prices  now  seen  to 
have  been  greatly  disproportionate  to  their  real  value, 
the  expenditure  of  immense  sums  in  improvements  which 
in  many  cases  have  been  found  to  be  ruinously  improvi- 
dent; the  diversion  to  other  purposes  of  much  of  the 
labor  that  should  have  been  applied  to  agriculture, 
thereby  contributing  to  the  expenditure  of  large  sums 
in  the  importation  of  grain  from  Europe — an  expendi- 
ture, which  amounting  in  1834  to  about  $250,000,  was  in 
the  first  two  quarters  of  the  present  year  increased  to 
more  than  $2,000,000 ;  and  finally,  without  enumerating 
other  injurious  results,  the  rapid  growth  among  all 
classes,  and  especially  in  our  great  commercial  towns,  of 
luxurious  habits  founded  too  often  on  merely  fancied 
wealth,  and  detrimental  alike  to  the  industry,  the  re- 
sources and  the  morals  of  our  people. 

"It  was  so  impossible  that  such  a  state  of  things  could 
long  continue  that  the  prospect  of  revulsion  was  pres- 
ent to  the  minds  of  considerate  men  before  it  actually 
came." 

Slow  Recovery.  In  1838  solvent  bankers  again  resumed 
specie  payments,  hoping  to  restore  confidence  and  bring 
about  a  gradual  contraction  of  credit.  The  attempt  might 
have  been  successful  had  it  not  been  for  the  actions  of 
Nicholas  Biddle.  Biddle  desired  to  avoid  a  too  rapid 
deflation  of  currency,  and  to  counteract  the  prevailing 
tendency  toward  contraction  he  engaged  in  a  number  of 
unwise  speculations  in  State  bonds  and  cotton.  He  bought 
at  high  prices  in  the  United  States  and  sold  at  low  prices 
abroad  hoping  to  sustain  foreign  credit  until  conditions  be- 
came tranquil.  His  speculations  brought  about  another 
general  suspension  of  specie  payments  in  1839,  and  this 


THE  PANIC  OF  1837  319 

time  liquidation  was  thorough  and  complete.  Biddle's 
bank  paid  its  depositors  and  the  holders  of  its  notes,  but 
the  stockholders^lost  every  cent  of  the  $35,000,000  capital. 
Biddle  lost  everjrthing  he  possessed.  Dozens  of  other  banks 
failed  completely. 

Many  people  were  imprisoned  for  debt  and  there  was  a 
feeling  of  unrest  and  discontent.  Acting  under  the  power 
granted  in  the  Constitution  Congress  passed  a  general 
bankruptcy  law  in  1841,  and  39,000  persons  took  advantage 
of  its  terms  to  obtain  a  settlement  of  their  indebtedness. 
Under  this  process  some  $441,000,000  of  debt  were  can- 
celled. Bank  debts  to  the  extent  of  $200,000,000  were 
added  to  this  loss.  While  liquidation  in  private  business 
was  in  progress  the  States  began  to  encounter  difficulty  in 
meeting  the  interest  and  the  principal  of  the  huge  debts 
which  they  had  contracted.  The  improvements  in  which 
the  money  had  been  sunk  yielded  no  revenue,  and  if  pay- 
ment were  to  be  made,  the  funds  had  to  be  obtained  by 
taxation.  The  legislatures  of  a  number  of  States  took  the 
dishonorable  course  of  repudiating  the  principal  and  the 
interest  of  the  debts.  Since  a  State  could  not  be  sued 
without  its  consent  it  was  impossible  to  compel  payment. 
Foreign  holders  of  State  bonds  lost  large  sums  of  money, 
and  American  credit  received  a  severe  blow. 

The  Federal  Government  lost  heavily  through  the  failure 
of  the  banks,  and  because  of  the  lack  of  sound  fiscal  agen- 
cies had  much  difficulty  in  making  collections  and  dis- 
bursements. Congress  decided  that  banks  should  no  longer 
be  employed  to  take  care  of  public  funds  and  in  1840  estab- 
lished an  independent  treasury  system.  The  law  of  1840 
was  repealed  the  following  year  and  several  attempts  were 
made  to  establish  another  national  bank.  Those  attempts 
failed  because  of  the  opposition  of  President  Tyler,  and  in 
1846  the  independent  treasury  system  was  reestablished. 
The   law   directed  that   strong   vaults  be   constructed   at 


320  THE  PANIC  OF  1837 

various  cities,  and  provided  that  the  Treasury  Department 
should  be  the  actual  custodian  of  the  public  money. 

The  crises  of  1837  and  1839  put  an  end  to  speculation 
for  the  time  being  and  brought  prices  down  to  a  specie 
level.  Reorganization  proceeded  slowly  but  surely.  People 
were  compelled  to  go  to  work ;  there  was  a  sharp  decline  in 
the  purchase  of  foreign  goods.  By  1843  business  had  be- 
come almost  normal  again,  and  another  period  of  indus- 
trial and  commercial  expansion  started. 

Questions  and  Topics 

1.  What  now  happens  to  an  individual  whose  liabilities 
are  greater  than  his  convertible  assets?  What  happened 
in  1830? 

2.  How  does  history  seem  to  prove  that  United  States 
bonds  are  safer  investments  than  State  bonds? 

3.  Compare  the  services  that  the  first  and  second  United 
States  Banks  performed  for  the  Government  with  those 
performed  by  the  Treasury  Department. 

4.  Is  the  Federal  Reserve  System  anything  like  the 
Second  United  States  Bank  and  its  branches?     Explain. 

5.  Would  you  call  Jackson  a  good  President  or  not? 


PART  V 
OCCUPATION  OF  THE  GREAT  WEST 


CHAPTER  XVII 

TERRITORIAL  AND  INDUSTRIAL  EXPANSION, 
1840-1860 

The  Western  Advance.  A  resistless  drive  toward  the 
West  has  been  an  outstanding  feature  of  American  history 
since  the  beginning  of  colonization.  Between  1840  and 
1873  the  western  advance  exercised  a  peculiarly  dominat- 
ing influence  upon  national  history.  It  was  during  these 
years  *hat  the  people  acquired  and  occupied  the  Great 
West.  They  did  not  settle  all  of  it — the  work  of  settle- 
ment has  not  yet  been  accomplished,  and  will  not  be  accom- 
plished for  many  generations  to  come — but  they  extended 
their  political  dominion  to  the  Pacific  coast,  and  by  opening 
lines  of  transportation  into  the  new  region  they  completed 
the  work  of  occupation  and  prepared  the  way  for  settle- 
ment and  development.  The  occupation  of  the  West  was 
related  to  the  most  important  events  of  the  political  history 
of  the  nation  during  these  years.  The  Civil  War  was  a 
part  of  the  problem  of  western  expansion.  Though  the 
immediate  cause  of  the  war  was  the  question  of  the  right  of 
secession,  the  fundamental  cause  was  a  difference  of  opinion 
as  to  whether  the  Great  West  should  be  developed  by  the 
enterprise  and  initiative  of  free  labor  or  be  subjected  to 
the  deadening  influence  of  negro  slavery. 

In  our  study  of  this  period  of  national  expansion  we 
shall  deal  first  with  industrial  and  commercial  development 
before  the  Civil  War,  then  examine  the  condition  of  the 
nation  while  the  war  was  in  progress,  and  finally  note  the 
course  of  development  during  the  period  of  reaction  fol- 
lowing the  war. 

323 


324  WESTWARD  EXPANSION 

Greneral  Characteristics  of  the  Period  from  1840  to 
1860.  An  interesting  feature  of  the  economic  history  of 
the  United  States  from  1840  to  1860  was  the  comparative 
lack  of  artificial  stimulation  of  any  particular  branch  of 
industry.  Previous  periods  had  witnessed  the  encourage- 
ment of  foreign  commerce  or  of  manufactures.  During 
this  period  no  industry  received  special  favors  in  any 
marked  degree.  All  branches  of  economic  endeavor  com- 
peted openly  and  freely  for  labor  and  for  capital,  with  the 
result  that  all  kinds  of  industry  prospered.  While  the 
sectional  division  of  labor  caused  the  country  to  be  sepa- 
rated more  distinctly  than  before  into  a  cotton-raising 
South,  a  grain-raising  West,  and  a  manufacturing  and 
commercial  East,  the  industrial  development  of  the  nation, 
as  a  whole,  was  more  symmetrical  than  in  previous  years. 
Agriculture  prospered,  and  because  of  natural  advantages 
easily  retained  the  lead  among  industries.  But  manufac- 
turing, mining,  transportation,  shipping  and  commerce 
all  had  a  noteworthy  expansion.  Though  tariff  duties  were 
materially  lower  than  during  the  decade  preceding  1833, 
it  was  found  that  many  varieties  of  manufacturing  indus- 
try could  thrive  Avithaut  the  aid  of  special  protection. 
With  competition  entirely  free  American  shipping  inter- 
ests enjoyed  exceptional  prosperity  and  the  American  mer- 
chant marine  attained  a  tonnage  which  was  not  to  be 
equaled  again  until  the  time  of  the  recent  World  War. 
The  railroad  facilities  of  the  country  were  greatly  extended, 
and  domestic  and  foreign  trade  increased  in  volume  and 
value. 

An  important  effect  of  this  symmetrical  development  of 
industry  on  the  country  as  a  whole  was  the  general  dif- 
fusion of  material  comforts  among  the  people.  There  were 
opportunities  on  all  sides  for  workers  and  for  investors.  So 
general  was  the  prosperity  of  the  nation  that  this  period 
has  often  been  called  the  "Golden  Age"  of  American  his- 


WESTWARD  EXPANSION  325 

tory.  There  were  no  individuals  possessing  enormous 
wealth,  and  what  was  still  better  there  were  few  paupers. 
Europeans  who  traveled  in  the  United  States  invariably- 
commented  on  the  absence  of  pauperism.  The  condition 
of  the  people  as  a  whole  was  far  superior  to  the  condition 
of  the  people  of  Europe. 

An  Era  of  Great  Inventions.  The  years  from  1840  to 
1860  were  rendered  notable  by  the  bringing  into  practical 
use  of  a  number  of  highly  important  inventions.  These 
years  compare  favorably  with  the  early  years  of  the  Indus- 
trial Kevolution  in  England.  The  great  inventions  of  this 
time,  like  the  inventions  which  transformed  the  textile  in- 
dustries, derived  their  importance  from  the  fact  that  they 
did  work  which  had  previously  been  done  entirely  by  hand. 
Such  inventions  revolutionize  the  processes  of  production ; 
they  are  few  in  number  and  usually  far  apart  in  time. 
In  all  branches  of  industry  American  skill  and  ingenuity 
were  applied  in  a  practical  way  to  increase  production. 
Previous  to  1849  not  more  than  660  patents  had  been  taken 
out  in  the  United  States  in  a  single  year;  between  1850 
and  1860  the  number  of  patents  granted  annually  fell  be- 
low 1,000  in  only  three  years,  and  in  1860  the  number 
reached  4,819. 

Territorial  Expansion.  During  the  ten  years  following 
1844  the  territory  of  the  United  States  was  almost  doubled. 
The  first  increase  came  early  in  1845  with  the  annexation 
of  the  republic  of  Texas.  In  December  Texas  was  received 
into  the  Union,  the  last  slave  State  to  be  admitted. 

The  following  year  the  United  States  obtained  control 
of  a  portion  of  the  Oregon  Territory.  Both  Great  Britain 
and  the  United  States  claimed  the  great  region  west  of 
the  Rocky  Mountains  extending  between  the  latitudes  of 
42°  and  54°  40'.  In  1843  Marcus  Whitman  led  a  caravan 
of  200  wagons  from  Westport  Landing  on  the  Missouri 
River  over  the  Great  Salt  Lake  and  the  Oregon  Trails  into 


326  WESTWARD  EXPANSION 

the  Oregon  country.  Within  a  short  time  a  few  thousand 
Americans  were  domiciled  in  the  Northwest  and  the  ques- 
tion of  political  jurisdiction  had  to  be  settled.  Many  peo- 
ple in  the  United  States  demanded  that  Great  Britain  be 
required  to  give  up  all  claim  to  the  disputed  territory,  and 
with  the  battle-cry  of  "Fifty-four,  forty  or  fight"  they 
urged  the  Federal  authorities  to  uphold  the  American 
claims,  if  necessary,  by  force  of  arms.  For  a  time  there  was 
grave  danger  of  war  with  Great  Britain.  Fortunately  the 
dispute  was  amicably  settled  in  1846.  The  territory  was 
divided  between  the  rival  claimants,  the  forty-ninth  paral- 
lel of  latitude  being  made  the  northern  boundary  of  the 
United  States. 

The  land  hunger  of  the  nation  was  not  appeased  by 
these  two  acquisitions.  The  slave-holding  interests  of  the 
South  turned  covetous  eyes  on  the  Mexican  possessions 
west  of  Texas.  President  Polk  found  it  an  easy  matter  to 
provoke  a  war  with  Mexico.  Torn  by  internal  dissensions 
Mexico  could  offer  but  feeble  resistance  to  American  arms 
and  could  not  avoid  the  surrender  of  the  territory  which 
the  United  States  demanded  as  the  price  of  peace.  By  the 
treaty  of  Guadaloupe  Hidalgo,  signed  February  2,  1848, 
Mexico  gave  up  the  vast  region  north  of  the  Rio  Grande 
and  the  Gila  River,  receiving  in  exchange  fifteen  million 
dollars.  Five  years  later  the  "Gadsden  Purchase"  added 
fifty  thousand  square  miles  more  of  Mexican  territory 
south  of  the  Gila  River  to  the  possessions  of  the  United 
States.  The  "star  of  empire"  had  crossed  the  continent. 
The  area  of  the  United  States  had  increased  to  3,026,000 
square  miles. 

Population:  Increase  and  Distribution.  Between  1830 
and  1860  the  population  of  the  United  States  advanced 
from  12,866,020  to  31,443,321.  Each  decennial  census 
showed  an  increase  of  aproximately  one-third  in  the  num- 
ber of  people.     The  promise  of  economic  independence  and 


WESTWARD  EXPANSION  327 

political  freedom  attracted  thousands  of  immigrants  from 
Europe.  The  revolutionary  disturbances  of  1830  and  1848 
caused  many  Europeans  to  seek  refuge  in  "free  America," 
and  recurring  shortages  of  food  in  Ireland  and  other 
European  districts  drove  large  numbers  of  people  across 
the  Atlantic.  During  the  twenty  years  preceding  1860 
nearly  four  and  a  half  million  immigrants  came  to  the 
United  States.  JVIore  than  half  of  them  came  from  Great 
Britain  and  Ireland,  and  more  than  a  fourth  from  Prussia 
and  other  German  states. 

The  population  of  all  parts  of  the  country  increased  at  a 
rapid  rate,  but  the  rate  of  increase  was  by  no  means  the 
same  in  all  sections.  In  both  the  South  Atlantic  and  the 
North  Atlantic  States  the  rate  was  less  than  the  rate  for 
the  country  as  a  whole.  In  the  cotton  belt  of  the  South 
Central  region  the  rate  of  increase  was  somewhat  greater 
than  the  rate  for  the  entire  country.  In  the  great  Middle 
West — what  we  shall  now  call  the  North  Central  States — 
the  increase  in  numbers  was  spectacular.  The  fertile  soil 
of  this  region,  opened  to  settlement  by  the  Erie  Canal  and 
by  new  steam  railroads,  drew  thousands  of  European  im- 
migrants and  thousands  of  the  inhabitants  of  the  older 
States  in  the  East  and  South.  New  Englanders  abandoned 
their  rocky  hillside  farms  and  made  their  way  to  the  West ; 
many  "small  farmers"  of  the  South  sold  their  lands  to 
the  great  cotton  planters  and  went  to  the  region  where  in- 
dividual enterprise,  initiative,  and  manual  labor  had  a 
more  respectable  standing  and  were  productive  of  better 
results.  In  1830  the  North  Central  region  contained  a 
little  more  than  one-tenth  of  the  entire  population  of  the 
country ;  in  1860  it  had  considerably  more  than  one-fourth. 
The  rate  of  increase  in  this  section  was  more  than  twice 
the  rate  of  increase  for  the  entire  country.  The  admission 
of  Wisconsin  as  a  state  in  1848  brought  the  last  of  the 
territory  east  of  the  Mississippi  into  the  Union,  and  the  ad- 


328 


WESTWARD  EXPANSION 


mission  of  Minnesota  in  1858  completed  the  tier  of  States 
just  west  of  the  Misssissippi.  The  region  across  the 
Missouri  Eiver  began  to  fill  up  and  the  quarrel  over  the 
admission  of  Kansas  was  one  of  the  direct  causes  of  the 
attempt  to  destroy  the  Union. 

Between  Kansas  and  California  there  were  few  inhabi- 
tants in  1860,  the  only  settlements  of  much  importance 
being  the  Mormon  settlements  in  the  vicinity  of  Great 
Salt  Lake.  A  small  group  of  Latter-Day  Saints  emigrated 
to  the  Great  Desert  in  1847,  and  in  a  region  of  sage-brush 


Emigrants  Crossing  the  i'laiiis 

plain,  believed  by  explorers  to  be  useless  and  barren,  they 
established  a  system  of  irrigation  which  created  farms  of 
surprising  productiveness.  Converts  to  the  church  were 
brought  from  Europe  and  from  the  Eastern  States,  and  a 
thriving  community  soon  grew  up  centering  about  Salt 
Lake  City. 

"When   the   Mexican   provinces   of   California   and   New 
Mexico  were  taken  by  the  United  States  the  population 


WESTWARD  EXPANSION  329 

consisted  of  a  few  thousand  people  engaged  chiefly  in  rais- 
ing sheep  and  cattle.  The  ink  on  the  treaty  of  Guadaloupe 
Hidalgo  had  scarcely  dried  when  gold  was  discovered  in 
the  gravel  of  a  river  bed  near  Sutter's  Mill  in  California. 
The  announcement  of  this  discovery  was  the  signal  for  a 
great  rush  of  gold-hunters  from  all  over  the  world. 
Around  Cape  Horn,  by  way  of  the  Isthmus  of  Panama  and 
directly  across  the  plains  and  mountains  of  the  United 
States  the  excited  and  eager  ''forty-niners"  hastened  to 
reach  the  new  El  Dorado.  Though  gold  was  the  lure  which 
drew  men  to  California  it  was  the  agricultural  and  forest 
resources  which  constituted  the  basis  of  the  permanent  pros- 
perity of  the  Pacific  Coast.  By  1860  the  population  of  the 
Pacific  Coast  region  was  more  than  half  a  million.  Cali- 
fornia entered  the  Union  in  1850  and  Oregon  followed 
in  1859. 

Agriculture.  The  increase  in  the  production  of  cereals 
and  cotton  between  1840  and  1860  was  proof  of  the  ad- 
vancing prosperity  of  the  United  States.  The  great  crops 
of  cereals  were  due  in  a  large  measure  to  the  introduction 
of  labor  saving  machinery  on  the  farms.  Until  after  1840 
the  planting,  cultivating,  harvesting  and  threshing  of  grain 
were  performed  almost  entirely  by  manual  labor.  Only 
in  plowing  and  harrowing  the  soil  did  the  farmer  use  the 
power  of  horses  and  oxen.  Then  in  quick  succession  came 
mechanical  planters,  cultivators,  mowers,  reapers  and 
threshing  machines.  The  most  important  of  the  new 
mechanical  devices  was  probably  the  reaper — the  harvest- 
ing machine.  Wheat,  oats,  rye  and  other  small  grains 
ripen  quickly  and  must  be  harvested  soon  after  they  have 
ripened  or  the  grain  may  be  lost.  The  slow  process  of 
cutting  with  scythe  and  cradle  limited  greatly  the  amount 
of  grain  which  a  single  farmer  could  raise.  The  reaper 
could  cut  as  much  grain  as  a  dozen  men  working  with 
cradles. 


330 


WESTWARD  EXPANSION 


The  mower  and  reaper  were  developed  together.  The 
former,  used  in  cutting  grass  or  hay,  permitted  the  grass 
to  fall  to  the  ground  as  it  was  cut;  the  latter,  used  in 
harvesting  grain,  had  just  back  of  the  cutter-bar  a  carrier 
or  table  which  carried  the  grain  until  enough  was  accumu- 
lated to  make  a  sheaf.  With  the  early  types  of  reapers,  a 
man  walking,  or  riding  on  the  machine,  raked  the  sheaves 
to   the   ground;   later   types   deposited   the   sheaves   auto- 


Cyrus  H.  McCormick 

Courtesy  of  International  Harvester  Company  of  America. 

matically.     The  grain  was  bound  by  hand,  the  automatic 
binder  not  being  introduced  until  after  the  Civil  War. 

One  of  the  first  reapers  was  invented  by  Obed  Hussey  in 
1833.  The  following  year  Cyrus  H.  McCormick,  a  Vir- 
ginia blacksmith,  took  out  a  patent  on  a  reaping  machine. 
These  early  machines,  like  the  first  steamboats,  locomotives, 
automobiles  and  other  similar  mechanical  devices,  were  too 
crude  and  unwieldy  to  be  of  practical  use.  By  1840 
McCormick  had  built  a  reaper  which  would  do  the  work  it 


WESTWARD  EXPANSION  331 

was  designed  to  do,  and  do  it  well.  He  sold  several  reapers 
to  Ohio  and  Virginia  farmers,  and  secured  capital  which  en- 
abled him  to  establish  a  factory  in  the  new  and  rapidly- 
growing  city  of  Chicago,  close  to  the  center  of  the  great 
grain  belt.  By  1855  he  was  manufacturing  and  selling 
hundreds  of  reapers  and  mowers  each  year.  Several  other 
factories  were  erected  in  both  the  Eastern  and  the  Western 
States  to  make  reapers,  mowers  and  other  kinds  of  farm 
machinery.  At  the  great  exposition  held  in  Paris  in  1855 
an  American  reaper  showed  its  superiority  over  machines 
of  foreign  manufacture  by  cutting  an  acre  of  oats  in  22 


'^^ 


^'.>:^>. 


UrtijMlii^^ 


X       .1 


>    -' 


A  Reaper  of  1860 

minutes  as  compared  with  66  minutes  taken  by  the  next 
best  machine,  which  was  of  British  manufacture.  In  1860 
the  number  of  reapers  made  and  sold  in  the  United  States 
reached  20,000. 

Horse  drawn  rakes  and  hay  tedders  supplemented  the 
mower  in  solving  the  problem  of  caring  for  the  large  crops 
of  hay  needed  for  the  maintenance  of  live  stock  on  North- 
ern farms  during  the  winter.  Horse-power  threshing 
machines  of  a  successful  type  were  manufactured  before 
1850.  In  1853,  at  a  New  York  fair,  a  machine  threshed, 
cleaned,  and  measured  wheat,  at  the  same  time  placing  it 
in  bags  and  recording  the  number  of  bushels  threshed. 


332  WESTWARD  EXPANSION 

The  American  machine  exhibited  in  Paris  in  1855  threshed 
twelve  times  as  much  grain  in  an  hour  as  six  men  working 
with  the  old-fashioned  flails.  The  census  of  1860  stated 
that  in  a  number  of  States  portable  steam  engines  were 
being  used  to  supply  power  to  operate  threshing  machines. 
Farm  machinery  did  what  the  cotton  spinning  machinery 
and  the  cotton  gin  had  done.  It  increased  many  times  the 
effectiveness  of  the  individual  laborer.  It  soon  made  the 
United  States  the  greatest  food  producing  nation  in  the 
world.  One  writer  said,  "The  reaper,  the  thresher,  and 
the  mower  are  types  of  the  ever  restless  and  progressive 
spirit  of  the  age.  They  point  out  to  us  a  glorious  future, 
in  which  they  will  accomplish  for  us  and  for  our  country 
triumphs  grander  than  the  triumphs  of  arms  for  they 
will  develop  the  means  of  supporting  millions  of  human 
beings  which  the  implements  of  war  can  only  destroy." 

With  the  introduction  of  farm  machinerj^  and  the  settle- 
ment of  the  North  Central  States  the  center  of  cereal  pro- 
duction moved  steadily  westward.  In  1840  and  in  1850 
Pennsylvania,  Ohio  and  New  York  were  the  three  leading 
wheat  producing  States,  but  in  1860  Illinois  was  first,  Indi- 
ana second,  and  Wisconsin  third.  Illinois  led  also  in  the 
production  of  corn.  The  census  of  1850  showed  that  the 
South  produced  more  corn  and  swine  than  the  North, 
though  the  chief  producing  centers  of  the  South  were  the 
border  States  and  not  the  States  of  the  cotton  belt.  Ten 
years  later  the  North  led  in  the  production  of  all  kinds  of 
grain  and  live  stock.  The  hog  raising  business  moved  west- 
ward with  the  center  of  corn  production,  and  with  it  went 
the  meat-packing  business,  Chicago  taking  the  lead  from 
Cincinnati  as  a  meat-packing  center  shortly  after  1860. 

The  cotton  planters  of  the  South  received  no  new 
mechanical  devices  comparable  to  the  reapers,  mowers,  and 
threshing  machines  of  the  Northern  farmers,  but  they  in- 
creased the  size  of  their  plantations  and  employed  larger 


WESTWARD  EXPANSION  333 

numbers  of  slaves.  It  is  estimated  that  in  spite  of  the  strin- 
gent laws  which  placed  the  external  slave  trade  in  the  class 
of  crime  with  piracy  some  270,000  African  negroes  were 
smuggled  into  the  United  States  between  1808  and  1860, 
The  planters  of  the  coast  States  north  of  Georgia  sold  many 
of  their  slaves  to  the  more  successful  planters  of  the  Gulf 
States,  and  slaves  from  Kentucky  and  ^lissouri  were  also 
sold  "down  the  river"  to  toil  in  the  cotton  fields.  By  1860 
a  first  class  negro  laborer  would  bring  as  much  as  $1500 
on  the  auction  block  at  New  Orleans.  Each  year  the  out- 
put of  cotton  increased  until  in  1860  it  reached  the  large 
total  of  3,841,000  bales  of  500  pounds  each,  more  than  five 
times  the  quantity  raised  in  1830.  Sugar,  tobacco,  and 
corn  maintained  a  place  among  the  agricultural  products 
of  the  South,  but  no  product  was  of  sufficient  importance 
to  challenge  the  lead  of  "King  Cotton." 

Manufacturing.  When  the  period  of  annual  reduction  of 
tariff  duties,  provided  for  in  the  law  of  1833,  came  to  an 
end,  there  was  a  deficit  in  the  Federal  Treasury  because 
of  the  ill  effects  of  the  panics  of  1837  and  1839.  In  1842 
the  tariff  was  revised  and  a  number  of  high  protective 
duties  restored.  The  protective  features  of  the  new  law 
were  designed  by  the  Whigs  to  attract  political  support, 
but  they  did  not  have  the  desired  effect.  When  the  Demo- 
crats were  restored  to  power  they  revised  the  tariff  again, 
in  1846,  framing  the  new  law  primarily  with  regard  to 
the  revenue  needs  of  the  Government  and  granting  only 
incidental  protection  to  manufacturers.  After  the  enact- 
ment of  this  law  the  tariff  question  virtually  disappeared 
as  a  political  issue.  When  in  1857  the  Government  was 
embarrassed  by  surplus  revenue,  representatives  from  all 
parts  of  the  country  joined  in  voting  to  reduce  the  rates 
of  duty  which  had  been  provided  in  the  law  of  1846. 

Notwithstanding  the  "revenue  tariffs"  manufacturing 
industries  continued   to   prosper  throughout  the   Eastern 


334  WESTWARD  EXPANSION 

States.  In  the  Central  States,  too  there  were  many  busy 
manufacturing  centers,  and  even  in  the  South — particu- 
larly in  the  States  along  the  Atlantic  coast — a  number  of 
factories  were  successfully  operated.  The  census  of  1860 
showed  the  value  of  the  manufactured  products  of  the 


Auction  Sale  of  Slaves  in  the  Rotunda,  New  Orleans,   1842 

United  States  to  be  $1,855,000,000,   as  compared  with  a 
value  of  $1,019,106,616  shown  by  the  census  of  1850. 

Textiles.  In  1860  the  cotton  mills  of  the  United  States 
turned  out  more  than  a  billion  yards  of  cloth.  Twenty- 
nine  States  had  cotton  mills  manufacturing  either  yarn  or 


WESTWARD  EXPANSION  335 

cloth  or  both.  One-half  the  entire  number  of  mills  were 
to  be  found  in  New  England.  Because  of  the  advantage  of 
an  early  start  the  great  water-power  centers,  such  as 
Lowell,  Lawrence  and  Manchester,  all  located  on  the  Mer- 
rimac  River,  remained  the  chief  centers  of  production ;  but 
water-power  was,  by  1860,  no  longer  a  necessary  factor  in 
the  production  of  cotton  cloth.  Many  plants  operated  by 
steam  power  were  in  successful  operation  at  various  places 
scattered  throughout  the  country,  and  the  spirited  debate 
on  the  relative  advantages  of  the  steam-engine  and  the 
water-wheel  was  ending  with  a  definite  verdict  in  favor  of 
neither.  The  traveling  ring  spinner,  an  American  inven- 
tion, was  supplanting  the  mule  spinner  in  the  manufacture 
of  yarn;  larger  and  faster  looms  made  cloth  in  greater 
quantities;  wonderful  machines  were  perfected  to  print 
multicolored  designs  on  the  bleached  fabrics. 

Though  cotton  manufacturing  was  the  leading  textile 
industry,  its  products  were  not  quite  twice  as  great  in  value 
as  the  products  of  the  1700  woolen  mills  which  the  census 
of  1860  showed  to  be  in  operation  in  the  country.  Success- 
ful silk  mills  at  Paterson,  New  Jersey,  South  IVIanchester, 
Connecticut,  and  other  Eastern  cities  indicated  that  the 
manufacture  of  silk  thread  and  silk  fabrics  had  passed  the 
experimental  stage  and  was  taking  a  permanent  place 
among  American  manufacturing  industries. 

The  Clothing  Industry:  the  Sewing  Machine.  Closely 
related  to  the  manufacture  of  textiles  was  the  clothing  in- 
dustry. Previous  to  1835  American  clothing  was  made 
in  the  home  or  was  made  to  order  by  professional  tailors. 
About  1835  or  1836  some  New  York  cloth  merchants  be- 
gan to  manufacture  and  sell  "ready-to-wear"  men's  cloth- 
ing. Their  business  was  ruined  by  the  panic,  but  when 
normal  conditions  were  restored  they  started  anew  on  a 
larger  scale  than  before.  By  1860  the  manufacture  of 
clothing  was  one  of  the  leading  industries  of  New  York 


336  WESTWARD  EXPANSION 

City,  and  it  was  an  industry  of  importance  in  Boston,  Phil- 
adelpliia  and  several  other  cities.  Undergarments,  shirts 
and  outer  garments  were  made  in  standard  sizes  and  sold 
at  retail.  The  manufacturers  bought  the  cloth  and  trim- 
mings for  the  clothing,  hired  expert  cutters  to  cut  the 
cloth,  and  employed  men,  women  and  children  to  sew 
the  garments,  the  work  usually  being  done  in  the  homes  of 
the  workers.  The  ''sweat-shop"  was  a  part  of  the  clothing 
industry. 
Few  of  the  home  duties  long  performed  by  hand  had 


Elias  Howe 

been  more  tedious  and  trying  than  sewing.  The  develop- 
ment of  the  ready-made  clothing  trade  emphasized  the 
need  for  a  mechanical  sewing  device.  In  1846  Elias  Howe, 
a  Boston  mechanic,  took  out  a  patent  on  a  sewing  machine. 
Howe  did  not  have  enough  money  to  manufacture  his 
machine,  and  failing  to  obtain  the  necessary  aid  in  the 
United  States,  he  went  to  England  in  search  of  capital. 
When  he  returned  from  England  he  found  that  during  his 
absence  several  American  capitalists  had  recognized  the 
value  of  his  invention  and  had  started  to  manufacture  and 


WESTWARD  EXPANSION  337 

sell  sewing  machines.  Howe  was  more  fortunate  than  the 
inventor  of  the  cotton  gin  had  been,  for  he  succeeded  in 
enforcing  his  patent  rights  by  legal  process,  and  derived 
a  large  fortune  from  the  royalties  he  was  able  to  exact 
from  the  manufacturers  who  had  appropriated  his  patent. 
He  also  engaged  in  the  manufacture  of  machines  himself. 

The  sewing  machine  soon  became  immensely  popular. 
Its  manufacture  began  on  an  extensive  scale  about  1852, 
and  during  the  next  eight  years  more  than  130,000 
machines  were  made  and  sold.  The  sewing  machine  was 
essentially  a  device  for  home  work  and  the  chief  buyers 
were  the  men  and  women  who  worked  in  the  ready-to-wear 
clothing  industry.  Most  of  the  workers  earned  but  a  few 
dollars  a  week,  and  to  make  it  possible  for  them  to  buy 
machines,  the  Singer  Company  began  the  practice  of  selling 
on  the  instalment  plan,  "a  dollar  down  and  a  dollar  a 
week. ' ' 

Sewing  machines  were  used  in  factories  where  shirts, 
collars,  clothing  and  hats  were  made.  In  some  mills  bat- 
teries of  machines  were  operated  by  steam  power.  Heavy 
machines  were  made,  capable  of  stitching  leather,  and  were 
immediately  adopted  in  the  boot  and  shoe  industry  for 
sewing  together  the  various  parts  of  the  uppers  of  boots 
and  shoes.  Until  the  McKay  machine  was  invented  in 
1861,  the  uppers  and  soles  were  fastened  together  with 
wooden  pegs.  As  a  rule  the  pegging  was  done  by  hand, 
though  before  1860  a  pegging  machine  was  introduced 
which  drove  the  pegs  at  the  rate  of  fourteen  a  second. 

The  Iron  Industry.  The  general  expansion  of  manufac- 
turing, the  increased  used  of  mechanical  devices  in  many 
kinds  of  industry,  and  the  growth  of  steam  transportation 
by  rail  and  by  water  created  a  greater  and  greater  demand 
for  iron  and  its  products.  Agricultural  implements,  sew- 
ing machines,  textile  machinery,  wheels,  steam  engines, 
railroad  cars  and  many  other  devices  were  made  in  part  or 


338  WESTWARD  EXPANSION 

wholly  of  iron.  By  1860  the  pig-iron  product  of  the 
United  States  amounted  to  more  than  a  million  tons  a  year. 
Pennsylvania  was  far  in  the  lead  in  the  production  of  iron 
with  more  than  one-half  the  entire  output  of  the  country. 
The  ores  of  Pennsylvania  provided  most  of  the  raw  material 
for  the  pig-iron,  with  other  Eastern  sources  of  supply  in 
Ohio,  New  Jersey,  and  the  Lake  Champlain  district.  In 
1855  shipments  of  rich  ore  began  to  move  from  the  district 
around  the  western  end  of  Lake  Superior  to  the  furnaces 
of  Cleveland,  Buffalo  and  Pittsburgh. 

After  1840  the  ironmasters  came  to  depend  more  and 
more  upon  anthracite  coal  and  coke  for  fuel.  Timber  was 
still  plentiful,  however,  and  it  was  not  until  1855  that 
the  amount  of  pig-iron  smelted  with  anthracite  coal  ex- 
ceeded the  output  of  the  charcoal  furnaces.  Soft  coal  and 
coke  were  not  used  extensively  until  after  the  Civil  War. 
Cast  iron  and  wrought  iron  remained  the  leading  furnace 
and  forge  products.  In  1851  William  Kelly,  a  Kentucky 
ironmaster,  discovered  a  process  of  making  low-carbon  steel 
by  the  use  of  an  air  blast,  similar  in  nearly  all  respects 
to  the  process  which  Sir  Henry  Bessemer,  the  English  in- 
ventor, perfected  and  patented  about  1859.  Kelly  was 
unable  to  control  the  process  to  a  degree  that  would  enable 
him  to  produce  steel  of  a  uniform  qualitj^  and  he  did  not 
succeed  therefore  in  making  much  commercial  use  of  his 
discovery. 

Foundries,  forges,  machine  shops  and  rolling  mills  turned 
out  the  finished  products  of  iron.  In  the  foundries 
were  cast  stoves,  ranges,  utensils,  carwheels,  iron  pipe,  iron 
fences,  rollers  and  parts  of  engines.  ^Machine-shops  with 
turning-lathes  equipped  with  ingenious  automatic  contri- 
vances made  standardized  parts  for  the  engines  and  the 
machinery  used  in  American  factories.  Saws,  files,  cutlery, 
augers,  metal  buttons  and  hardware  were  among  the  prod- 
ucts of  American  mills. 


WESTWARD  EXPANSION  339 

Before  this  period  the  rolling-mills  and  slitting-mills  of 
the  United  States  had  turned  out  only  flat  bars,  sheets 
and  rods,  out  of  which  various  finished  articles  were  made. 
In  1845  a  rolling-mill  at  the  Mount  Savage  Works  in  Mary- 
land began  to  make  iron  railroad  rails.  The  following 
year  a  second  rail  mill  began  to  operate  at  Danville,  Penn- 
sylvania, and  by  1860  American  mills  were  producing 
200,000  tons  of  rails  each  year.  Rolling-mills  turned  out 
boiler  plates  also,  as  well  as  I-beams  and  girders  and  other 
shapes  used  in  the  construction  of  bridges  and  buildings. 

Other  Manufactures.  Many  other  kinds  of  manufac- 
tured products  told  of  the  industrial  advance  of  America. 
The  working  of  the  food  products  of  farms  into  form  suit- 
able for  human  use  was  then,  as  now,  an  industry  of  lead- 
ing rank.  The  census  of  1860  showed  that  flour  and  meal 
were  the  most  valuable  manufactured  products  of  the 
country.  The  sawing  of  lumber,  sugar  refining,  tanning, 
printing  and  publishing,  distilling,  brewing  and  the  manu- 
facture of  paper,  glass,  soap,  candles,  snuff  and  tobacco, 
carriages  and  furniture  were  thriving  industries.  One  of 
the  most  interesting  manufacturing  enterprises  developed 
during  this  time  was  the  making  of  water-proof  rubber 
materials.  Early  efforts  to  make  water-proof  rubber  gar- 
ments resulted  in  dismal  failure  because  no  rubber  prepara- 
tion could  be  derived  which  would  withstand  the  ordinary 
temperature  of  a  summer  day.  After  18  years  of  fruitless 
experiment  Charles  Goodyear  discovered  by  accident  that 
mixing  a  small  quantity  of  sulphur  with  rubber,  under 
heat,  would  give  the  rubber  the  properties  needed.  Good- 
year's  ordinary  ''vulcanized  rubber"  was  soon  followed  by 
"vulcanite,"  an  extremely  hard  rubber  product,  and  with 
these  two  discoveries  came  a  long  list  of  valuable  articles 
made  partly  or  wholly  of  rubber,  such  as  waterproof  coats, 
boots  and  shoes,  belting,  hose,  floor  covering,  springs,  and 
packing  material  for  steam  cylinders. 


340  WESTWARD  EXPANSION 

Labor  Organizations.  The  growth  of  manufacturing 
led  to  efforts  on  the  part  of  wage  earners  to  organize  trade- 
unions.  The  industrial  depressions  following  the  panic  of 
1837  caused  the  dissolution  of  the  early  labor  organiza- 
tions, but  when  normal  conditions  were  restored  the  "labor 
movement"  was  started  again,  with  organized  agitation 
for  shorter  working-days,  higher  wages  and  better  working 
conditions  for  the  laboring  classes.  For  a  time  the  labor 
movement  was  related  with  a  plan  for  general  social  re- 
organization known  as  Fourierism.  This  was  a  communis- 
tic system  of  life  advocated  by  a  French  social  philosopher, 
Charles  Fourier.  The  experiments  in  Fourierism  in  the 
United  States  soon  failed,  after  which  the  labor  move- 
ment developed  into  trade-unionism.  Laborers  recognized 
the  value  of  collective  action  in  dealing  with  employers. 
The  movement  toward  the  organization  of  labor  unions 
composed  of  the  workmen  in  single  trades  began  about 
1850  with  the  founding  of  the  printers'  trade-union,  which 
later  became  the  International  Typographical  Union.  The 
hat-makers'  union  was  founded  in  1854  and  five  years  later 
the  Iron-Workers'  Union  of  North  America  and  the 
Machinists'  and  Blacksmiths'  Union  of  North  America 
were  established.  There  was  much  opposition  to  the  trade- 
union  movement,  especially  among  the  employers  of  labor, 
but  it  was  apparent  to  many  leading  thinkers  of  the  time 
that  only  through  organized  cooperation  could  the  labor- 
ing classes  make  felt  their  demands  for  the  abolition  of 
child  labor,  the  reduction  of  the  twelve  and  fourteen  hour 
working-day  and  for  other  reforms  upon  which  the  prog- 
ress of  society  depended.  A  number  of  public-spirited 
employers  welcomed  the  coming  of  labor  organizations  and 
gave  their  aid  to  the  labor  movement. 

Mining.  The  United  States  made  substantial  progress 
during  this  period  in  the  production  of  the  three  leading 
minerals  of  civilization — coal,  iron  and  copper — though  it 


WESTWARD  EXPANSION  341 

was  not  until  some  years  later  that  the  great  exploitation 
of  American  mineral  resources  began.  The  coal-burning 
locomotive  firebox  was  not  developed  until  just  before  1860, 
and  all  over  the  country  wood  was  used  for  domestic  pur- 
poses more  than  coal.  The  production  of  coal  in  1860 
amounted  to  13,000,000  tons,  of  which  two-thirds  was  Penn- 
sylvania anthracite.  The  copper  districts  around  the  west- 
ern end  of  Lake  Superior  supplied  most  of  the  7200  tons  of 
copper  which  the  country  produced  in  1860.  The  Galena 
lead  mines  continued  to  furnish  raw  material  for  the  sheet 
lead,  shot  and  paint  factories  of  the  Eastern  States. 

The  discovery  of  gold  in  California  in  1848  led  to  a 
large  increase  in  the  supply  of  this  highly  prized  metal. 
"When  the  gravel  and  sand  near  the  water-courses  were 
"panned"  of  their  dust  and  nuggets  the  gold-seekers 
turned  to  the  ''drifts"  of  dry  gravel  and  the  "ledges"  of 
gold-bearing  quartz,  erecting  stamping  mills,  rockers,  sluice- 
ways and  other  mechanical  devices  to  separate  the  metal 
from  the  dross.  Gold  deposits  were  discovered  in  Colo- 
rado, Nevada,  Idaho,  and  Montana,  and  rich  silver  ores 
were  found  at  a  number  of  places  in  the  Western  moun- 
tains. Each  new  "find"  was  a  signal  for  a  stampede  of 
miners  and  prospectors. 

In  1859  there  was  begun  in  a  small  way  in  western 
Pennsylvania,  near  Titusville,  the  systematic  development 
of  another  great  mineral  product  of  America — rock  oil,  or 
petroleum.  For  many  years  the  world  had  depended 
chiefly  upon  whale  blubber  and  the  fats  of  domestic  ani- 
mals for  the  oil  used  in  lighting  and  lubrication.  The  gen- 
eral adoption  of  machinery  in  manufacture,  agriculture  and 
transportation,  and  the  need  for  more  and  better  lights  in 
buildings  and  in  city  streets  had  caused  a  steady  increase 
in  the  demand  for  animal  oils.  Though  domestic  animals 
yielded  every  year  more  lard  and  tallow  and  though  the 
great  fleet   of  whaling  vessels  brought   home  larger  and 


342  WESTWARD  EXPANSION 

larger  quantities  of  oil,  the  price  of  this  needed  commodity 
steadily  advanced,  and  some  people  began  to  wonder  how 
the  rapidly  growing  demand  would  be  supplied. 

The  preliminary  report  of  the  Census  of  1860  contains 
the  following  statement : 

"The  scarcity  of  whale  and  other  fish  oils  in  the 
arts  has  been  supplied  by  an  increased  production  of 
lard  oil  and  especially  by  that  beneficent  law  of  com- 
pensation which  pervades  the  economy  of  nature,  and 
when  one  provision  fails  her  children,  opens  to  them 
another  in  the  exhaustless  storehouse  of  her  natural 
resources,  or  leads  out  their  mental  energies  upon  new 
paths  of  discovery  for  the  supply  of  their  own  wants. 
,  .  .  When  the  elaboration  of  the  metals  and  other 
igneous  arts  was  fast  sweeping  the  forests  from  the 
earth,  the  exhaustless  treasures  of  fossil  fuel,  stored  for 
his  future  use,  were  disclosed  to  man,  and  when  the  arti- 
ficial sources  of  oil  seemed  about  to  fail,  a  substitute  was 
discovered  flowing  in  almost  perennial  quantities  from 
the  depths  of  these  same  carboniferous  strata." 

For  many  years  before  1859  it  had  been  observed  that 
the  water  of  certain  springs  in  Pennsylvania  was  thickly 
coated  with  oil.  In  one  of  the  "oil  spring"  districts  some 
enterprising  individuals  removed  the  oil  from  the  water, 
bottled  it,  and,  ascribing  to  it  the  usual  marvelous  virtues 
of  "old  Indian  remedies,"  sold  it  for  medicinal  purposes 
under  the  name  of  "Seneka  Oil."  About  1855  some  chem- 
ists showed  that  the  rock  oil  of  Pennsylvania  had  qualities 
which  would  make  it  a  highly  successful  commercial  prod- 
uct for  use  in  illumination  and  lubrication.  A  company 
was  organized  to  search  for  the  source  of  the  oil.  E.  L. 
Drake  drilled  the  first  well.  He  struck  oil  at  a  depth  of 
69  feet,  and  installing  a  pump,  drew  from  the  ground  a 
thousand  gallons  of  oil  daily.  The  success  of  Drake's  un- 
dertaking had  an  effect  similar  to  the  discovery  of  gold 
in  California.     Here  was  a  valuable  natural  product  easily 


WESTWARD  EXPANSION  343 

and  cheaply  obtainable.  A  single  successful  well  would 
bring  fortune  to  its  owner.  Hundreds  of  speculators, 
rushing  to  the  valley  of  Oil  Creek,  leased  the  lands  of  the 
inhabitants  and  started  drilling  for  petroleum.  Great 
"gushers"  were  tapped  yielding  thousands  of  barrels  of 
oil.  Before  the  end  of  1860  nearly  two  thousand  wells 
were  sunk  in  the  Oil  Creek  region,  and  an  eager  search 
for  other  oil  fields  was  under  way.  The  refining  of  the 
crude  petroleum  into  lighting  and  lubricating  products  was 
added  to  the  list  of  important  manufacturing  industries. 

Railway  Transportation.  These  years  witnessed  the  de- 
velopment of  the  steam  railroad  as  a  successful  agency  for 
the  transportation  of  freight  and  passengers.  The  Erie 
Canal  and  the  Mississippi  River  continued  to  be  important 
arteries  of  commerce — in  fact  each  of  these  waterways  car- 
ried more  traffic  than  any  of  the  railroads — but  they  grad- 
ually lost  ground  in  the  competitive  struggle  with  the  rail- 
ways, while  hundreds  of  miles  of  minor  canals  and  water- 
ways in  the  East  and  in  the  Northern  Central  States  were 
abandoned  altogether.  The  railroad  could  surmount  the 
difficulties  imposed  by  elevation  and  by  a  cold  climate; 
the  steam  locomotive  was  faster  and  safer  than  the  steam- 
boat. 

From  1837  to  1845  construction  lagged  because  business 
was  suffering  from  the  effects  of  the  panic.  When  normal 
conditions  were  restored  a  period  of  great  activity  in  rail- 
road building  began,  which  lasted  until  the  beginning  of 
the  Civil  War.  By  1850  there  were  9,021  miles  of  railroad 
in  the  United  States;  by  1860  the  mileage  had  grown  to 
30,626.  The  extensive  construction  between  1850  and  1860 
was  ample  proof  of  the  growing  economic  strength  of  the 
United  States. 

One  of  the  most  significant  events  of  the  railroad  history 
of  this  time  was  the  completion  of  the  Western  Railroad  in 
1841.     This  line,  in  connection  with  the  Albany  and  West 


344  WESTWARD  EXPANSION 

Stockbridge  Railroad,  extended  from  Worcester,  Massa- 
chusetts, to  the  Hudson  River  opposite  Albany,  and  with 
the  Boston  and  Worcester  road,  provided  a  through  rail 
line  between  Boston  and  the  eastern  terminus  of  the  Erie 
Canal.  Previous  to  the  completion  of  this  line  there  had 
been  some  doubt  as  to  whether  railroads  could  be  operated 
cheaply  enough  to  carry  heavy  and  bulky  freight  over  long 
distances.  The  route  from  Albany  to  Boston  was  a  great 
success,  particularly  in  the  transportation  of  flour  and 
other  Western  food  products  to  the  commercial  and  manu- 
facturing centers  of  Massachusetts.  New  York  City  lost 
its  almost  exclusive  control  of  Western  trade  and  Boston 
entered  upon  a  season  of  great  prosperity. 

The  success  of  Boston's  railroad  connection  with  the 
West  had  a  stimulating  influence  upon  Philadelphia  and 
Baltimore.  The  people  of  those  two  cities  had  watched  the 
commercial  expansion  of  New  York  with  envy  and  alarm. 
They  now  saw  that  the  railroad  would  enable  them  to 
recover  some  of  the  Western  trade.  In  1846  the  State  of 
Pennsylvania  chartered  the  Pennsylvania  Railroad  Com- 
pany, authorizing  it  to  construct  a  railroad  between  Harris- 
burg  and  Pittsburgh.  With  a  road  already  in  operation 
from  Philadelphia  to  Harrisburg  the  new  line  would  com- 
plete a  continuous  route  across  the  State.  The  work  was 
finished  in  1854.  The  chartering  of  the  Pennsylvania 
Railroad  infused  new  energy  into  the  directors  of  the  Bal- 
timore and  Ohio  road,  and  they  pushed  their  rails  west- 
ward, reaching  Wheeling,  Virginia,  early  in  1853. 

Meanwhile  the  southern  counties  of  the  State  of  New 
York,  whose  people  had  received  but  little  benefit  from  the 
State's  expenditure  for  the  Erie  Canal,  had  induced  the 
legislature  to  charter  and  subsidize  a  company  to  build  a 
railroad  through  southern  New  York  from  the  Hudson 
River  to  Lake  Erie.  This  road,  now  the  Erie  Railroad,  was 
opened  between  Jersey  City  and  Dunkirk  in  1851.    Another 


WESTWARD  EXPANSION  345 

important  event  occuring  at  this  time  was  the  organization 
of  the  New  York  Central  Railroad  Company.  In  1850  there 
were  ten  small  companies  owning  a  series  of  short  rail- 
roads extending  from  Buffalo  to  Albany.  By  1853  these 
roads  were  united  into  the  New  York  Central.  The  Hud- 
son River  Railroad,  extending  along  the  east  shore  of  the 
Hudson  River  from  New  York  to  a  point  opposite  Albany, 
in  connection  with  the  New  York  Central,  made  a  through 
line  from  the  sea  to  the  lakes.  Thus  four  great  railroad 
lines  were  opened  between  the  North  Atlantic  coast  and 
the  interior  during  the  four  years  following  1850.  These 
great  main  lines  became  known  as  the  "trunk  lines,"  and 
the  district  through  which  they  pass  is  still  known  in 
railroad  geography  as  "trunk  line  territory." 

While  the  eastern  trunk  lines  were  being  pushed  to  com- 
pletion railroad  construction  was  being  carried  on  with 
abounding  energy  in  the  Northern  Central  States.  Most  of 
the  mileage  laid  down  between  1850  and  1860  was  built  in 
these  States,  and  in  1860  Illinois  had  more  railroad  track 
completed  than  any  other  State  in  the  Union.  The  Fed- 
eral Government  gave  great  tracts  of  land  to  the  Central 
States,  both  in  the  North  and  in  the  South,  and  this  land 
was  transferred  to  the  railroad  companies  as  a  subsidy 
for  construction.  The  State  governments  and  the  local 
governments — county,  city,  and  town — gave  large  cash 
bonuses  to  railroad  corporations  and  also  bought  gener- 
ously of  railroad  stocks  and  bonds.  Many  lines  were  built 
to  connect  the  agricultural  districts  with  the  leading  com- 
mercial centers  such  as  Cleveland,  Toledo,  Chicago,  Cin- 
cinnati and  St.  Louis.  The  railroads  in  the  Northern 
Central  States,  in  connection  with  the  eastern  trunk  lines, 
made  possible  all-rail  travel  and  trade  between  all  the  lead- 
ing cities  of  the  North.  In  1853  one  could  travel  by  rail  all 
the  way  from  New  York  and  Philadelphia  to  Chicago,  and 
two  years  later  rail  connection  was  established  between 


346 


WESTWARD  EXPANSION 


the  East  and  St.  Louis.  A  road  was  opened  between 
Chicago  and  Galena  on  the  Mississippi  River  in  1850. 
Four  years  later  the  Chicago,  Rock  Island  and  Pacific  also 
reached  the  Mississippi,  The  following  year  the  first  rail- 
road bridge  across  the  Mississippi  was  built  between  Rock 
Island  and  Davenport,  linking  the  railroad  from  Chicago 
with  a  line  extending  through  the  State  of  Iowa.  The  first 
road  to  reach  the  Missouri  River  was  the  Hannibal  and  St. 


Railroads  of  the  United  States  in   1860 


Joseph,  which  was  completed  just  before  the  Civil  War 
began. 

In  the  South  railroad  construction  was  not  so  active  as  in 
the  North.  In  the  South  Atlantic  States  there  was  more 
construction  than  in  the  States  farther  west.  The  Balti- 
more and  Ohio  was  looked  upon  as  a  southern  road. 
Virginia  and  North  Carolina  each  had  a  number  of  short 
lines,  and  just  before  1860  through  rail  connection  was 


WESTWARD  EXPANSION  347 

established  from  Richmond  and  Lynchburg  to  Chatta- 
nooga. The  road  from  Charleston  to  Hamburg  was  pushed 
westward  to  Atlanta,  and  the  Georgia  Railroad  and  Bank- 
ing Company  built  lines  from  Savannah  and  Macon  to 
Atlanta.  The  State  of  Georgia  built  a  railroad  from  Chat- 
tanooga to  Atlanta,  and  when  a  line  was  opened  from  Chat- 
tanooga to  Nashville  and  Memphis  shortly  before  1860,  the 
South  obtained  a  rail  route  from  the  coast  to  the  Mississippi 
River.  In  the  lower  Mississippi  Valley  railroad  construc- 
tion proceeded  slowly  because  few  thought  that  railroads 
could  compete  successfully  with  the  steamboat.  Just  be- 
fore 1861  through  rail  lines  were  completed  from  Mobile 
and  New  Orleans  to  the  Ohio  River  at  Cairo,  where  connec- 
tion was  made  with  the  Illinois  Central  Railroad  leading  to 
Chicago. 

Conditions  of  Railroad  Transportation.  Though  the 
country  had  a  large  mileage  of  railroad  in  1860  the  ease  of 
continuous  rail  transportation  was  not  so  great  as  might 
be  supposed.  Each  railroad  company  used  its  own  cars 
and  locomotives,  and  if  goods  were  to  be  carried  over  more 
than  one  road  it  was  necessary  to  transfer  them  from  the 
cars  of  one  company  to  the  cars  of  another.  In  the  same 
way  passengers  were  compelled  to  change  trains  frequently 
when  traveling  over  several  connecting  railroad  lines. 
Even  had  the  railroad  companies  possessed  a  desire  for 
greater  cooperation  in  caring  for  through  traffic  by  the 
interchange  of  equipment  such  a  practice  would  have  been 
impossible  in  many  cases  because  of  the  varying  gauges 
of  the  railroads.  The  Erie  Railroad  and  a  number  of  rail- 
roads in  the  South  and  Central  States  were  broad-gauge 
lines,  having  a  space  of  51/2  feet  or  more  between  the  rails, 
while  other  lines  were  of  several  different  gauges  most  of 
them  being  somewhat  less  than  5  feet.  However  plans  were 
taking  shape,  and  were  being  carried  out  in  part,  to  over- 
come some  of  the  inconveniences  of  rail  transportation. 


348  WESTWARD  EXPANSION 

The  consolidation  of  the  lines  between  Albany  and  Buffalo 
was  a  step  in  the  right  direction.  The  Pennsylvania  Rail- 
road obtained  control  of  the  connecting  lines  between  Har- 
risburg  and  Philadelphia  by  lease  and  by  purchase,  and 
thus  came  into  complete  control  of  a  line  from  Pittsburgh 
to  Philadelphia.  The  managers  of  all  the  eastern  trunk 
lines  were  making  plans  to  extend  their  systems  to  the 
Mississippi  River  and  Lake  Michigan,  either  by  the  lease 
and  purchase  of  existing  western  connections  or  by  new 
construction.  The  question  of  uniform  gauge  was  being 
considered,  and  much  spirited  argument  took  place  over 
the  relative  advantages  of  the  broad  and  the  narrow  gauge. 

The  mechanical  equipment  of  railroads  showed  the  same 
evidence  of  progress  that  was  found  on  the  farms  and  in 
the  factories.  The  wooden  rails,  surfaced  with  straps  of 
iron,  were  supplanted  nearly  everywhere  with  rolled  iron 
T-rails.  Well  built  bridges  and  tunnels  testified  to  the 
ability  of  American  civil  engineers.  Larger  and  heavier 
locomotives,  freight  cars,  and  passenger  cars  made  rail 
transportation  cheaper  and  more  efficient.  On  some  roads 
sleeping-cars  were  introduced,  A  double  row  of  bunks  on 
each  side  of  the  car  provided  comfortable  sleeping  accom- 
modations, but  the  cars  could  not  be  converted  into  ordi- 
nary coaches  for  day  travel.  George  M.  Pullman  was  at 
work,  however,  on  the  problem  of  building  a  convertible 
car. 

The  Express  Business,  An  interesting  transportation 
business  was  begun  in  1839,  when  William  F.  Ilarnden  of 
Boston  organized  an  "express"  service  between  Boston  and 
New  York.  Before  Harnden  's  venture  there  was  no  special 
agency  for  transporting  valuable  parcels  of  merchandise 
and  money.  Harnden  perceived  the  need  for  a  systematic 
service.  His  business  between  New  York  and  Boston  grew 
rapidly,  and  he  extended  the  service  to  other  cities.  He 
made  special  arrangements  with  railroad  companies  and 


WESTWARD  EXPANSION  349 

steamship  lines  for  the  transportation  of  his  messengers 
and  their  packages.  Harnden's  success  led  others  to  enter 
the  express  business,  and  before  1850  several  companies, 
including  the  American  and  the  original  Adams  companies, 
were  formed.  In  1852  Wells,  Fargo  and  Company  started 
in  business,  giving  particular  attention  to  the  transporta- 
tion of  express  traffic  between  the  Mississippi  River  and 
California.  The  adventures  of  the  men  who  crossed  and 
recrossed  mountains  and  plains  in  the  service  of  this  com- 
pany furnish  a  thrilling  chapter  in  the  history  of  the  Far 
West. 

The  Electric  Telegraph.  One  of  the  great  inventions  of 
this  period  was  the  magnetic  telegraph.  In  1835  Prof. 
Samuel  F.  B.  Morse  of  New  York  University  perfected  a  de- 
vice for  transmitting  signals  by  a  current  of  electricity. 
Even  after  he  had  shown  that  his  experimental  mechanism 
would  work  people  scoffed  at  his  assertion  that  he  could 
send  messages  for  long  distances.  Unable  to  interest  pri- 
vate capitalists  in  his  invention  he  went  before  Congress 
asking  for  an  appropriation  to  construct  a  telegraph  line. 
After  several  years  of  patient  urging  he  secured  an  ap- 
propriation of  $30,000  in  1843,  and  the  following  year 
constructed  the  first  telegraph  line,  extending  from  the 
Baltimore  and  Ohio  Railroad  station  in  Baltimore  to  the 
Supreme  Court  room  in  the  Capitol  at  Washington.  The 
initial  test  justified  the  confidence  of  the  inventor.  The 
first  message,  suggested  by  Annie  Ellsworth,  the  daughter 
of  the  Commissioner  of  Patents,  was  part  of  a  verse  from 
Numbers,  ''What  hath  God  wrought." 

The  success  of  the  first  telegraph  line  assured,  there  was 
no  lack  of  capital  to  undertake  the  construction  of  others. 
By  1860  nearly  50,000  miles  of  telegraph  lines  were  in 
operation  in  the  United  States.  A  line  was  erected  to  the 
Pacific  coast  in  1861.  The  first  Atlantic  cable  was  laid  in 
1858  by  Cyrus  W.  Field.     It  was  operated  successfully  for 


350 


WESTWARD  EXPANSION 


a  few  days  and  then  failed  because  of  faulty  .insulation. 
The  jeers  of  the  public  did  not  keep  the  courageous  Field 
from  trying  again,  and  in  1866  he  successfully  carried  out 
his  project. 

The  telegraph  was  not  only  useful  in  transmitting  com- 
mercial information,  private  messages  and  news  despatches; 
about  1850  its  use  began  as  an  aid  in  the  operation  of  steam 


S.  F.  B.  Morse 

railroads.  Trains  were  operated  on  regular  schedules,  and 
on  single  track  lines  the  failure  of  one  train  to  reach  the 
appointed  place  for  meeting  and  passing  a  train  from  the 
opposite  direction  upset  the  entire  train  schedule,  caus- 
ing much  loss  and  inconvenience.  By  using  the  telegraph 
to  transmit  orders  it  was  possible  for  a  central  train 
despatcher  to  appoint  other  meeting  places  for  trains 
which  did  not  maintain  their  regular  schedule.     Without 


WESTWARD  EXPANSION 


351 


the  aid  of  the  telegraph  railroad  operation  would  have 
developed  much  more  slowly. 

Currency  and  Banking.  The  discovery  of  gold  in  Cali- 
fornia resulted  in  a  substantial  addition  to  the  quantity 
of  gold  coin  in  the  United  States,  but  inasmuch  as  the  in- 
crease in  the  supply  of  gold  tended  to  decrease  its  value 
in  comparison  with  silver,  the  practice  of  exporting  silver, 


Cyrus  W.  Field 

caused  by  the  undervaluation  of  that  metal  in  the  coinage 
acts  of  1834  and  1837,  tended  to  increase.  The  use  of 
worn  coins  and  of  a  large  number  of  miscellaneous  foreign 
coins  of  doubtful  value  caused  much  confusion.  In  1853 
Congress  again  modified  the  coinage  laws.  The  new  act 
provided  that  the  fractional  silver  coins  should  contain 
a  quantity  of  silver  somewhat  less  in  value  than  the  nominal 
value  of  the  coins.  The  temptation  to  export  fractional 
coins  was  removed,  because  they  had  more  value  as  coins 
than    as    bullion.     The    Government    did    not    offer    free 


352  WESTWARD  EXPANSION 

coinage  of  fractional  silver  coins.  The  mint  bought  silver 
bullion,  made  the  coins,  and  the  Treasury  passed  them 
out  at  their  face  value,  the  Government  thereby  making 
a  small  sum  upon  each  fractional  coin  minted.  The  law 
had  the  desired  result,  and  the  country  soon  had  an 
abundant  supply  of  fractional  metallic  currency.  The 
amount  of  silver  in  the  silver  dollar  was  not  changed,  and 
consequently  no  silver  dollars  were  coined  and  circulated. 

The  crises  of  1837  and  1839  were  a  severe  lesson  to  the 
business  interests  of  the  nation,  a  lesson  which  led  to  ef- 
forts in  a  few  States  to  regulate  the  banking  business. 
The  strong  Suffolk  Bank  of  Boston  came  to  occupy  a  posi- 
tion with  respect  to  New  England  banks  similar  to  that 
which  the  United  States  Bank  had  formerly  occupied  with 
respect  to  the  various  State  banks  of  the  country.  The 
Suffolk  Bank  accepted  at  par  the  notes  of  any  New  England 
bank  which  agreed  to  maintain  specie  payments  and  also 
to  keep  a  permanent  deposit  with  the  Suffolk  Bank,  The 
Massachusetts  legislature  passed  a  law  forbidding  banks 
to  pay  out  over  their  counters  any  notes  but  their  own. 
Banks  receiving  the  notes  of  other  banks  found  it  con- 
venient to  send  such  notes  to  the  Suffolk  Bank  for  redemp- 
tion and  collection.  In  this  way  the  Suffolk  Bank  be- 
came a  clearing  house  for  the  banks  of  ^Massachusetts,  and 
finally  for  nearly  all  the  banks  of  New  England.  Since 
the  Suffolk  Bank  insisted  that  the  banks  in  the  "sj^stem" 
maintain  specie  payments,  the  bankers  were  careful  about 
their  loans  and  credits,  and  New  England  had  a  safe  and 
useful  banking  organization. 

The  State  of  New  York  adopted  a  banking  system  upo)i 
which  the  national  banking  sj^stem  was  later  to  be  modeled. 
Banks  were  required  to  deposit  securities — stocks  and 
bonds  of  an  approved  character — with  the  State  Comp- 
troller, as  a  pledge  for  the  redemption  of  their  notes. 
This  system  did  not  work  well  at  first  because  of  the  vio- 


WESTWARD  EXPANSION  353 

lations  of  the  law  by  unscrupulous  bankers  and  because  the 
securities  of  an  insolvent  bank,  when  sold  at  a  forced  sale, 
would  occasionally  not  bring  enough  to  redeem  the  out- 
standing bank-notes.  Eventually  the  system  was  perfected 
however  and  New  York  obtained  a  satisfactory  banking 
business. 

In  the  South  and  in  the  Central  States  not  so  much 
effort  was  made  to  regulate  the  banking  business,  and  while 
several  notably  strong  banks  were  organized,  there  was 
also  a  large  number  of  "wild-cat"  banks,  whose  managers 
endeavored  to  repeat  the  excesses  practised  before  the 
panic  of  1837.  The  influence  of  the  more  conservative 
banks  served  to  check  the  growth  of  unsound  banking 
however,  and  conditions  did  not  become  so  bad  as  in  former 
years.  INIany  bank-notes  circulated  at  a  discount  because 
of  lack  of  confidence  in  the  banks  by  which  they  were  is- 
sued. Merchants  kept  "Bank-Note  Reporters"  which  gave 
the  current  value  of  the  notes  of  different  banks.  The 
great  variety  of  bank-notes,  and  the  many  differences  in 
color  and  engraving,  served  to  make  counterfeiting  some- 
what easy,  and  led  to  attempts  to  print  and  circulate  much 
spurious  currency. 

The  Panic  of  1857.  In  1857  the  United  States  suffered 
again  from  a  financial  crisis.  The  cause  was  excessive 
speculation  following  a  season  of  highl}^  prosperous  in- 
dustrial and  commercial  development.  The  discovery  of 
gold  in  California  and  the  large  grants  of  land  to  rail- 
road companies  did  much  to  encourage  speculative  activity. 
Many  millions  of  dollars  were  invested  in  the  stocks  and 
bonds  of  railroads  and  factories.  Many  banks  made  large 
loans  to  new  business  corporations,  taking  stocks  and  bonds 
in  exchange.  In  August,  1857,  the  Ohio  Life  Insurance 
and  Trust  Company,  which  had  loaned  several  million  dol- 
lars to  unsuccessful  railroad  corporations,  failed.  Its 
failure  brought  failure  to  a  number  of  other  business  es- 


354  WESTWARD  EXPANSION 

tablishments.  There  was  a  sudden  loss  of  confidence  in 
stocks,  bonds,  bank-notes,  and  other  credit  instruments, 
and  people  engaged  in  a  mad  scramble  to  turn  their  paper 
into  specie.  Many  banks  were  forced  to  suspend  specie 
payments,  and  several  thousand  business  houses  closed 
their  doors. 

The  panic  of  1857  was  not  so  severe,  however,  as  the 
panic  of  1837.  There  had  been  much  speculation,  but 
there  had  also  been  large  investments  in  growing  produc- 
tive enterprises.  Wealth  was  increasing  at  a  rapid  rate. 
Before  1837  so  much  money  had  been  sunk  in  unproduc- 
tive improvements  or  had  been  spent  for  luxuries  that 
debtors  could  not  possibly  pay  their  debts.  There  had 
been  too  much  waste.  In  1857  the  borrowed  funds  had 
gone  largely  into  railroads  and  factories  which  needed  but 
little  time  to  become  profitable  undertakings.  The  result 
was  that  the  depression  of  1857  was  of  short  duration. 
Confidence  was  speedily  restored,  production  resumed,  and 
by  1860  the  effects  of  the  panic  had  entirely  disappeared. 

Questions  and  Topics 

1.  List  some  of  the  American  inventions  and  improve- 
ments upon  inventions  between  1840  and  1860. 

2.  Are  there  any  American  inventions  which  are 
peculiarly  national  in  their  use? 

3.  Was  the  annexation  of  a  part  of  Mexico  by  the  treaty 
of  Guadaloupe  Hidalgo  just  to  ^Mexico? 

4.  Why  did  slave  owners  usually  favor  territorial  ex- 
pansion ? 

5.  Why  is  there  little  tendency  on  the  part  of  immigrants 
to-day  to  settle  in  the  North  Central  part  of  the  United 
States  or  the  uncrowded  sections  of  the  country? 

6.  What  other  settlements  beside  Salt  Lake  City  have 
been  made  in  various  parts  of  the  United  States  by  groups 
of  people  seeking  religious  freedom? 

7.  What  effect  does  the  finding  of  much  gold  have  on  the 
currency? 

8.  Can  you  account  for  the  apparent  backwardness  of 


WESTWARD  EXPANSION  355 

the  South  in  the  invention  and  use  of  labor  saving  and 
time  saving  devices? 

9.  Show  how  the  sewing  machine  made  a  minor  revolu- 
tion in  home  industry. 


CHAPTER  XVIII 
DOMESTIC  TRADE;   FOREIGN   TRADE;   SHIPPING. 

1840-1860 

Domestic  Commerce.  Increased  production,  better 
means  of  transportation  and  continued  sectional  division 
of  labor  were  reflected  in  the  constantly  expanding  do- 
mestic commerce  of  the  United  States  between  1840  and 
1860.  The  South  continued  to  be  the  central  factor  in  the 
domestic  and  foreign  trade  of  the  country,  producing  large 
quantities  of  cotton  for  export  and  relying  upon  the  North 
for  food,  livestock  and  manufactured  goods.  Exports  of 
Southern  cotton  paid  in  part  for  the  foreign  imports  con- 
sumed in  the  North,  the  South  receiving  in  the  process  of 
exchange  the  products  of  Northern  farms  and  factories. 
One  writer  described  the  commercial  situation  of  1860  as 
follows, 

''The  proceeds  of  Southern  crops  comes  North  simply  to 
pay  Southern  debts.  Take  an  illustration  of  this  on  a 
grand  scale.  Every  year  the  value  of  merchandise  going 
West  on  the  Erie  Canal,  New  York  Central  and 
Erie  Railroads,  exceeds  that  coming  East  on  the  same 
routes  by  $100,000,000.  This  is  a  puzzle  to  many  per- 
sons. ...  It  is  simply  the  process  by  which  that  sec- 
tion gets  pay  for  the  products  which  it  sells  to  the 
South.  These  debts  cotton  pays.  The  Northern  shipper 
takes  it  to  Europe,  brings  back  the  proceeds,  which  are 
distributed  by  Northern  merchants  and  factors  through- 
out the  length  and  breadth  of  the  land.  It  is  not  con- 
venient for  the  West  to  receive  its  pay  through  Norfolk 
or  Charleston  or  Savannah  or  New  Orleans,  but  through 
Northern  Cities  and  on  interior  routes  of  communica- 
tion." 

356 


COMMERCE  AND  SHIPPING  357 

Of  the  two  branches  of  domestic  commerce,  the  coastwise 
trade  and  the  internal  trade,  the  former  was  the  greater 
in  value,  though  as  the  interior  of  the  country  was  set- 
tled and  rail  transportation  became  more  efficient,  internal 
trade  grew  very  rapidly.  There  were  two  important  divi- 
sions of  internal  trade  between  1840  and  1860,  the  trade 
on  the  Mississippi  River,  and  the  trade  between  the  Eastern 
and  the  Northern  Central  States  carried  by  the  Great 
Lakes  and  the  Erie  Canal  and  by  the  trunk-line  railroads. 
There  were  other  minor  currents  of  internal  traffic  such 
as  the  trade  between  the  eastern  and  western  sections  of 
the  Southern  States  and  the  overland  trade  with  the  Far 
West. 

Coastwise  Commerce.  The  failure  of  the  Government 
to  collect  statistical  information  covering  the  coastwise 
commerce  of  the  United  States  has  always  made  it  impos- 
sible to  give  an  exact  statement  of  the  nature  and  volume 
of  the  coastwise  traffic.  The  best  index  of  the  growth  of 
the  coastwise  trade  between  1840  and  1860  is  the  statistics 
of  coastwise  shipping.  This  shipping  (including  tonnage 
on  the  Great  Lakes)  increased  from  1,176,694  tons  in  1840 
to  2,644,867  tons  in  1860.  By  far  the  largest  part  of  this 
tonnage  was  employed  on  the  Atlantic  and  Gulf  coasts, 
carrying  Southern  cotton,  rice,  lumber  and  tobacco,  and 
some  Western  farm  produce  to  the  ports  of  the  North 
Atlantic  coast  and  returning  with  manufactured  goods  of 
domestic  and  foreign  production  and  all  kinds  of  ordinary 
merchandise.  Cotton  w-as  the  chief  factor  in  the  coast- 
wise trade.  Throughout  the  colonial  period  and  down 
almost,  to  the  War  of  1812  there  had  been  comparatively 
little  coastwise  trade  between  the  North  and  the  South, 
because  neither  section  produced  articles  which  the  other 
section  consumed  in  large  quantities.  The  rise  of  cotton 
culture  and  of  cotton  manufacture  changed  this  situation. 
The  cotton  manufacturers  of  the  North  depended  upon 


358  COMMERCE  AND  SHIPPING 

the  Southern  planters  for  their  raw  material,  and  the 
planters,  devoting  all  their  energies  to  the  production  of 
cotton,  were  content  to  have  their  vi^ants  supplied  by 
Northern  merchants,  manufacturers,  bankers  and  shipown- 
ers. Most  of  the  coastwise  trade  was  carried  in  sailing 
vessels,  though  steamships  were  used  in  greater  numbers 
each  year.  Before  1860  a  number  of  coastwise  steamship 
lines  afforded  regular  service  between  the  leading  Northern 
and  Southern  seaports. 

Commerce  of  the  Great  Lakes  and  Erie  Canal.  The 
outstanding  feature  of  the  internal  trade  carried  on  the 
Great  Lakes  and  Erie  Canal  during  the  two  decades  fol- 
lowing 1840  was  the  remarkable  growth  of  the  eastbound 
traffic  in  cereals  and  flour.  When  the  Erie  Canal  was 
opened  the  region  about  the  Great  Lakes  contributed  almost 
nothing  to  the  commerce  of  the  nation.  Until  after  1835 
the  shipments  of  New  York  grain  reaching  the  Hudson 
River  on  the  canal  were  larger  than  the  shipments  of 
Western  grain.  By  1840  the  quantity  of  Western  grain 
moving  over  the  canal  was  considerably  greater  than  the 
quantity  originating  in  New  York.  Increasing  steadily 
each  year  the  shipments  of  Western  grain  arriving  at  the 
lake  ports  of  New  York  grew  until  in  1860  they  amounted 
to  more  than  sixty  million  bushels.  The  shipments  of 
grain  from  the  ports  of  Lake  j\Iichigan  alone,  in  1860  were 
43,211,448  bushels.  The  first  shipment  of  grain  from  a 
Lake  Michigan  port  had  occurred  in  1836.  The  grain  trade 
of  Chicago  did  not  begin  until  1838  when  39  sacks  of  wheat 
were  sent  to  Buffalo;  in  1860  Chicago,  one  of  the  leading 
grain  markets  of  the  world,  sent  twenty  millions  bushels 
of  grain  eastward  on  the  lakes. 

The  notable  fact  about  the  lake  grain  traffic  was  that  it 
represented  new  agricultural  development.  Very  little 
of  it  was  traffic  diverted  from  some  other  route  of  trans- 
portation.    It  was  the  product  of  newly  settled  lands  in 


COMMERCE  AND  SHIPPING  359 

Michigan  and  Wisconsin  and  in  northern  Ohio,  Indiana 
and  Illinois.  The  great  grain  crops  of  the  lake  district 
might  have  proved  embarrassing  to  American  farmers  had 
new  markets  for  grain  not  been  found  after  1840.  For- 
tunately the  British  Parliament  repealed  the  ancient 
English  Corn  Laws  in  1846,  thereby  opening  the  markets 
of  Great  Britain  to  foreign  grain  and  flour.  The  Ameri- 
can farmer  obtained  a  needed  market,  and  the  British 
factory  worker  enjoyed  a  better  standard  of  living. 

The  ports  of  the  Great  Lakes  ([uickly  expanded  from 
small  towns  to  large  cities.  No  city  in  the  United  States 
grew  more  rapidly  than  Chicago.  Not  mentioned  in  the 
census  of  1830,  and  having  a  population  of  only  5,000  in 
1840,  Chicago  was  in  1860  a  city  of  109,000,  and  was  grow- 
ing at  a  rate  indicating  that  it  would  soon  pass  New 
Orleans,  St.  Louis  and  Cincinnati,  which  were  then  the 
largest  cities  west  of  the  Appalachian  highland.  Milwau- 
kee, Detroit,  Toledo,  Cleveland  and  Buffalo  likewise 
prospered  greatly.  Railroads  radiating  from  these  cities 
brought  in  the  grain  to  be  shipped  to  Eastern  markets, 
and  distributed  to  interior  towns  and  cities  the  mer- 
chandise received  in  exchange  for  the  grain. 

The  shipping  employed  in  the  lake  and  canal  trade  in- 
creased from  50,000  tons  in  1841  to  451,000  tons  in  1860. 
]\Iore  than  two-thirds  of  the  lake  vessels  were  sloops  and 
schooners,  but  steamboats  were  used  each  year  in  increas- 
ing numbers.  The  screw  propeller  invented  by  Erickson 
in  1836  was  found  to  be  adaptable  to  lake  shipping,  and 
a  number  of  the  steamers  on  the  lakes  were  equipped  with 
this  device.  Such  steamers  were  called  "propellers"  to 
distinguish  them  from  the  "steamboats,"  which  had  pad- 
dle-wheels. 

Though  grain  and  flour  made  up  the  largest  part  of  the 
eastbound  lake  and  canal  traffic  they  were  by  no  means 
the  only  important  commodities  in  this  branch  of  the  in- 


360  COMMERCE  AND  SHIPPING 

ternal  trade.  Pork  products,  hides,  wool,  whiskey,  some 
live  stock,  and  iron  and  copper  ores  were  also  carried 
eastward  by  lake  and  canal.  The  white  pine  forests  of 
the  lake  region  not  only  supplied  enormous  quantities  of 
building  material  for  the  towns  and  cities  in  the  lake 
district  but  also  provided  lumber  for  Eastern  cities. 

The  westbound  lake  and  canal  traffic  was  smaller  in 
volume  than  the  eastbound  shipments  but  was  considerably 
greater  in  value.  It  consisted  chiefly  of  finished  manu- 
factured wares  and  imported  merchandise  of  various  kinds. 
The  furniture  and  other  household  goods  of  immigrants 
were  an  important  part  of  the  traffic,  while  drygoods, 
cordage,  wearing  apparel,  railroad  equipment,  paper, 
machinery,  drugs,  sugar,  coffee,  tobacco  and  salt  reached 
Buffalo  in  large  quantities  to  be  sent  to  lake  ports  further 
west  for  distribution.  The  value  of  the  Erie  Canal  traffic 
destined  for  States  west  of  New  York  increased  from 
$9,723,250  in  1836  to  $94,230,720  in  1854.  The  westbound 
traffic  reached  its  maximum  value  in  the  latter  year.  The 
trunk  line  railroads  readily  absorbed  the  high-grade  mer- 
chandise traffic  after  that  year  and  the  value  of  the  ship- 
ments carried  on  the  canal  declined. 

The  Trunk  Line  Railroad  Traffic.  The  completion  of 
the  trunk  line  railroads  had  a  pronounced  effect  upon  the 
trade  between  the  Eastern  and  the  Northern  Central  States. 
Not  only  did  the  railroads  take  from  the  Erie  Canal  the 
high-grade  merchandise  traffic;  they  also  took  a  part  of 
the  eastbound  traffic  in  flour  and  other  products  of  agri- 
culture. More  important,  however,  than  the  effect  of  the 
railroads  on  the  canal  business  was  their  effect  upon  the 
trade  of  the  Ohio  Valley.  The  railroads  gave  this  region  a 
direct  route  to  the  East  that  was  cheaper  and  faster  than 
the  roundabout  route  by  way  of  New  Orleans.  The  out- 
bound shipments  of  southern  Ohio,  Indiana  and  Illinois 
were  in  part  diverted  from  the  Mississippi  River  to  the 


COMMERCE  AND  SHIPPING 


361 


railroads,  and  the  Northern  Central  States  became  much 
more  closely  connected  with  the  East  than  with  the  South. 
In  1852  the  railroads  "captured"  the  lead  trade  of  Galena. 
Not  a  single  pound  of  lead  went  down  the  Mississippi  after 
that  year.  Previously  the  annual  shipments  to  New 
Orleans  had  frequently  amounted  to  more  than  half  a  mil- 
lion pounds.  In  1850  Cincinnati  sent  375,000  barrels  of 
flour  to  New  Orleans  and  other  down  river  markets  and 
less  than  8,000  barrels  up  the  Ohio  River.  In  1858  the 
down-stream  shipments  of  flour  from  Cincinnati  were  only 


Steamboats  on  the  Mississippi,  1860 

18,000  barrels  while  545,000  were  sent  east  by  rail  and 
river. 

The  railroads  also  brought  about  a  change  in  the  live 
stock  trade.  The  practice  of  driving  cattle  overland  to 
Eastern  markets  stopped  after  the  trunk  line  railroads  were 
finished.  In  1859  live  stock  was  the  most  important  single 
kind  of  traiific  on  the  Pennsylvania  Railroad.  It  was  no 
longer  necessary,  after  rail  transportation  became  avail- 
able, for  the  farmers  of  Illinois  to  winter  their  cattle  in 
Ohio  before  sending  them  to  Eastern  cities. 

The  Mississippi  River  Trade.  Though  the  Eastern  trunk 
line  railroads  took  away  some  of  the  traffic  of  the  Mis- 
sissippi River  the  loss  which  the  river  suffered  was  for  the 


362 


COMMERCE  AND  SHIPPING 


time  being  relative  and  not  absolute.  The  people  of  the 
South  demanded  ever  increasing  quantities  of  Northern 
grain  and  provisions  and  the  river  traffic  in  foodstuffs  in- 
creased slowly  even  after  the  railroads  took  the  surplus 
destined  for  the  foreign  market  and  for  consumption  in 
the  East.  What  the  river  failed  to  obtain  of  the  grain 
traffic  was  largely  compensated  for  by  the  great  increase 
in  the  cotton  traffic  of  the  States  in  the  lower  Mississippi 
Valley.     Each  year  the  downstream  shipments  of  cotton 


New  Orleans  in  1860 

increased  in  quantity,  with  the  result  that  the  total  receipts 
of  produce  at  New  Orleans  grew  steadily  in  value.  Even 
when  the  through  rail  lines  from  Charleston  and  Savannah 
captured  a  portion  of  the  cotton  trade  of  Mississippi  and 
Tennessee,  the  increased  production  of  cotton  in  the  States 
on  the  west  bank  of  the  Mississippi  caused  the  river  cotton 
traffic  to  grow,  and  enabled  New  Orleans  to  hold  a  firm 
lead  among  the  cotton  ports.  The  decade  from  1850  to 
1860  w^as  the  "golden  age"  of  the  river  trade.  The  year 
1860  was  the  "best  year  on  the  river,"  the  receipts  of  pro- 


COMMERCE  AND  SHIPPING  363 

duee  at  New  Orleans  reaching  a  value  of  $185,211,254,  a 
greater  amount  than  was  carried  by  either  the  Erie  Canal 
or  by  the  trunk  line  railroads.  Hundreds  of  steamboats, 
some  of  them  of  palatial  luxury,  plied  between  New 
Orleans  and  the  up-river  cities.  Some  of  the  boats  were 
poorly  built,  many  were  operated  recklessly,  and  dis- 
astrous collisions  and  boiler  explosions  were  not  uncom- 
mon. The  great  American  humorist,  Samuel  L.  Clemens, 
was  for  a  time  a  pilot  on  a  Mississippi  River  steamboat. 
He  obtained  his  pseudonj^m  "Mark  Twain,"  an  well  as  the 
material  for  many  of  his  stories,  from  his  experiences  on 
the  river. 

The  commercial  leaders  of  the  South  began  to  realize 
after  1850  that  the  trade  of  the  Mississippi  was  show- 
ing signs  of  decay  because  of  the  competition  of  the  rail- 
roads extending  to  the  Atlantic  coast.  J.  D.  B.  DeBow, 
said  that  Northern  enterprise  had  "rolled  back  the  mighty 
tide  of  the  Mississippi  and  its  ten  thousand  tributary 
streams  until  their  mouth,  practically  and  commercially 
speaking  is  at  New  York  and  Boston  rather  than  at  New 
Orleans."  DeBow  urged  that  railroads  be  constructed 
parallel  to  the  river  to  enable  New  Orleans  to  maintain 
its  commercial  position.  He  succeeded  in  starting  a  move- 
ment for  railway  construction,  but  little  was  accomplished 
before  the  Civil  "War. 

Internal  Trade  w^ith  the  Far  West.  Before  the  war 
with  Mexico  the  people  of  the  United  States  opened  up 
a  trade  with  the  jMexican  settlements  of  the  Southwest. 
Great  wagons,  drawn  by  oxen,  carried  merchandise  over 
the  Santa  Fe  Trail  to  the  Mexican  towns  and  returned 
with  loads  of  wool  and  hides.  After  the  ^Mormons  planted 
their  settlements  in  Utah  a  small  wagon  trade  was  opened 
between  St.  Joseph  and  Salt  Lake  City. 

The  discovery  of  gold  in  California  and  in  other  Western 
districts  caused  a  great  demand  for  tools,  food  and  cloth- 


364  COMMERCE  AND  SHIPPING 

ing  from  the  East.  The  greater  portion  of  the  traffic 
reached  California  on  ocean  vessels,  but  a  part  of  it  was 
carried  overland  in  wagons — "prairie  schooners,"  as  the 
white-topped  vehicles  were  called.  A  number  of  indivi- 
duals and  companies  engaged  in  the  business  of  "freight- 
ing" between  the  towns  on  the  Missouri  and  Mississippi 
Rivers  and  the  Far  West.  In  1859  one  company,  that  of 
Russel,  Majors  and  Waddell,  had  6,000  wagons  and  75,000 
oxen  employed  in  carrying  goods  between  St.  Joseph  and 
Sacramento  by  way  of  Salt  Lake  City.  The  company  also 
operated  a  stage  coach  line  over  this  route.  In  the  South- 
west the  Wells-Butterfield  Company  did  a  thriving  busi- 
ness over  a  route  extending  from  St.  Louis  to  San  Diego. 
In  1858  this  company  secured  a  contract  for  carrying  the 
mail  between  St.  Louis  and  San  Francisco,  over  the 
southern  route,  by  way  of  Ft.  Smith,  El  Paso,  Tucson 
and  San  Diego.  The  route  was  2,760  miles  long  and  the 
stage  coaches  were  scheduled  to  make  the  long  dangerous 
trip  in  25  days.  Russel,  Majors  and  Waddell  were 
anxious  to  obtain  the  mail  contract,  and  to  demonstrate 
the  superiority  of  the  northern  route  to  the  Pacific  coast, 
in  1860  they  established  their  famous  Pony  Express  be- 
tween St.  Joseph  and  San  Francisco.  Every  ten  miles 
along  the  route  they  maintained  posts  at  which  their  riders 
changed  horses.  Each  rider  covered  a  "section"  of  ap- 
proximately 100  miles.  In  1861  the  Pony  Express  car- 
ried Lincoln's  inaugural  address  over  the  2,000  mile  route 
in  7  days  and  17  hours.  William  F.  Cody  (Buffalo  Bill), 
one  of  the  most  famous  of  the  Western  frontiersmen,  was 
for  a  time  a  Pony  Express  rider.  In  1861  the  mails  were 
transferred  to  the  northern  route,  the  work  of  transporting 
them  being  divided  between  the  two  rival  companies.  Both 
firms  had  spent  so  much  money  in  establishing  their  lines 
that  they  became  involved  in  financial  difficulties.  Ben 
Holliday  took  the  mail  contract  and  operated  the  large 


COMMERCE  AND  SHIPPING  365 

stage  line  for  a  short  time,  but  after  losing  much  of  his 
equipment  through  Indian  depredations  he  sold  out  the 
business  to  Wells,  Fargo  and  Company. 

Foreign  Commerce.  Until  the  indebtedness,  created  by 
the  excessive  importation  of  goods  just  before  the  panic  of 
1837,  was  liquidated,  the  overseas  commerce  of  the  United 
States  remained  somewhat  stagnant,  but  once  normal  busi- 
ness conditions  were  restored  there  was  a  steady  increase 
of  both  exports  and  imports.  During  the  fifteen  years  pre- 
ceding 1860  foreign  commerce  grew  at  a  more  rapid  rate 
than  it  had  ever  grown  before.  Previous  to  1840  an 
annual  foreign  trade  of  more  than  $250,000,000  was  con- 
sidered abnormally  large.  In  1860,  notwithstanding  the 
fact  that  the  country  had  just  emerged  from  an  industrial 
depression,  the  merchandise  exports  of  the  United  States 
had  a  value  of  $333,576,057  and  the  imports  a  value  of 
$353,616,119. 

Cotton  was  the  great  export  product.  It  seldom  failed 
to  account  for  one-half  the  value  of  the  annual  merchandise 
exports,  and  occasionally  the  exports  of  cotton  were  twice 
as  great  in  value  as  all  other  exports  put  together. 
Wheat,  corn,  flour,  provisions  and  lumber  were  exported 
in  considerable  quantities,  and  small  shipments  of  manu- 
factured goods  were  sent  to  South  American  and  Oriental 
seaports.  Among  imports,  manufactured  goods — chiefly 
textiles  of  cotton,  silk  and  wool,  and  articles  of  iron — held 
a  leading  position,  while  tropical  foodstuffs,  such  as  sugar, 
coffee  and  tea,  were  next  in  importance.  Europe  was  the 
chief  buyer  of  American  exports  and  the  chief  source  of 
American  imports.  England  led  all  countries  in  buying 
American  products  and  in  supplying  the  wants  of  the 
American  people  for  foreign  goods. 

With  cotton  the  leading  export  the  Southern  cities  of 
the  United  States  had  a  larger  export  trade  than  the 
Northern  cities.     New  Orleans  usually  stood  first  as  an 


366 


COMMERCE  AND  SHIPPING 


export  city,  with  New  York  a  close  second.  Mobile, 
Savannah  and  Charleston  each  sent  large  quantities  of 
cotton  abroad.  Though  the  South  led  in  exports  its  share 
of  the  import  trade  was  very  small.  New  York  was  the 
only  great  importing  center,  receiving  usually  two-thirds 
of  all  the  imports  which  entered  the  country,  or  twice  as 
much  as  all  other  ports  combined.  Boston  held  second 
place  in  the  import  trade,  and  New  Orleans  was  a  poor 


The  Rainbow 

Courtesy  of  Submarine  Signal  Company  of  Boston. 

third,  occasionally  ranking  below  Philadelphia  and  Balti- 
more. 

American  Shipping.  The  tonnage  of  American  shipping 
employed  in  foreign  commerce  grew  at  a  more  rapid  rate 
between  1840  and  1860  than  the  value  of  the  American 
foreign  trade.  Never  before  or  since  have  American  ship- 
builders and  shipowners  enjoyed  such  a  long  period  of 
uninterrupted  prosperity.     Ships  flying  the  American  flag 


COMMERCE  AND  SHIPPING  367 

went  to  all  the  ports  of  the  world  distributing  the  com- 
mercial wares  of  all  nations.  American  shipowners  had 
a  carrying  trade  larger  and  more  valuable  than  the  car- 
rying trade  of  their  British  rivals,  and  the  tonnage  of  the 
American  merchant  marine  in  1860  was  equal  to  the  ton- 
nage of  shipping  owned  by  the  British  nation. 

An  important  factor  in  the  success  of  the  American  ship- 
ping business  was  the  excellence  and  the  cheapness  of 
American  sailing  vessels.  From  early  colonial  times  Amer- 
ican shipbuilders  had  constructed  sailing  vessels  of  superior 
quality,  and  they  demonstrated  their  exceptional  enter- 


Clipper  Ship 

prise  and  ability  throughout  this  period.  In  1845  John  "W. 
Griffiths,  an  American  naval  architect,  designed  and  built 
the  Rainbow,  the  first  "clipper  ship."  The  hull  of  the 
Bainhow  differed  from  the  hull  of  any  vessel  previously 
constructed.  Its  greatest  breadth  was  in  the  midship  sec- 
tion instead  of  forward,  and  the  concave  lines  of  the  long 
narrow  bow  enabled  the  vessel  to  cleave  the  water  with  a 
minimum  amount  of  resistance.  Many  shipbuilding  ex- 
perts jeered  at  Griffiths'  revolutionary  work  and  predicted 
that  the  Rainbow  would  never  return  from  her  first 
voyage.     Their  jeers  gave  place  to  admiration  when  the 


368  COMMERCE  AND  SHIPPING 

new  clipper  made  a  voyage  between  Canton  and  New  York 
in  three  weeks  less  time  than  the  distance  had  ever  be- 
fore been  covered.  Griffiths'  ideas  were  at  once  adopted 
by  shipbuilders  in  Boston,  New  York,  Philadelphia  and 
elsewhere,  and  in  a  short  time  a  large  number  of  clipper 
ships  were  constructed.  British  shipowners  gladly  bought 
vessels  of  the  new  type.  The  discovery  of  gold  in  Cali- 
fornia gave  the  operators  of  clipper  ships  an  opportunity 
to  show  what  their  vessels  could  do.  Dozens  of  ships 
sailed  from  the  Atlantic  ports  of  the  United  States  around 
Cape  Horn  to  San  Francisco  carrying  the  eager  gold  hunt- 
ers and  cargoes  of  picks,  shovels  and  other  tools.  In 
1851  the  clipper,  Flying  Cloud,  made  the  voyage  from 
Sandy  Hook  to  the  Golden  Gate  in  89  days,  establishing 
a  record  which  had  been  equaled  by  only  one  other  sail- 
ing vessel.  With  fair  winds  the  best  sailing  ships  of  1850 
could  outdistance  the  fastest  steamboats. 

Ocean  Steam  Navig-ation.  The  excellence  of  the  clipper 
ships  was  in  part  responsible  for  the  undoing  of  the  Amer- 
ican merchant  marine.  Just  as  the  belief  of  the  Southern 
people  that  the  Mississippi  River  steamboat  was  superior 
to  the  railroad  resulted  in  the  decay  of  the  commerce  of 
New  Orleans,  so  the  confidence  of  American  shipowners 
in  the  superiority  of  sailing  vessels  over  steamships  re- 
sulted eventually  in  a  decline  of  the  American  carrying 
trade.  An  American  inventor  built  the  first  successful 
steamboat,  and  an  American  shipowner  was  the  first  to 
cross  the  ocean  in  a  steamship,  but  it  was  the  British  who 
recognized  the  commercial  possibilities  of  ocean  steam  navi- 
gation and  developed  the  ocean  steamship  service. 

In  1839  Samuel  Cunard  founded  the  famous  Cunard 
Steamship  Company  and  the  following  year  established  a 
semi-monthly  steamship  service  from  Liverpool  to  Hali- 
fax and  Boston.  Cunard  received  from  the  British  gov- 
ernment a  mail  subsidy  of  $425,000  a  year,  and  later  $850,- 


COMMERCE  AND  SHIPPING 


369 


000  a  year.  The  service  offered  by  the  Cunard  line  was 
regular  and  certain,  and  the  transatlantic  passenger  tralific 
began  to  abandon  American  packet  lines  for  the  British 
steamships. 

In  spite  of  Cunard 's  success  most  American  shipowners 
refused  to  believe  in  the  superior  efficiency  of  the  ocean 
steamer  until  after  the  British  had  obtained  a  good  start. 
Finally,  in  1845  and  1847,  Congress  enacted  legislation 
to  promote  the  development  of  ocean  steam  navigation 
under  the  American  flag.  Liberal  subsidies  were  offered  to 
those  who  would  establish  American  steamship  lines,  and 


The  Adriatic 


under  the  influence  of  this  legislation  four  lines  were 
started.  The  Ocean  Steam  Navigation  Company  estab- 
lished service  from  New  York  to  Havre  and  Bremen ;  Ed- 
ward K.  Collins,  the  head  of  the  "Dramatic  Line"  of  sail- 
ing packets,  started  a  line  between  New  York  and  Liver- 
pool ;  a  third  line  connected  New  York,  Charleston,  New 
Orleans,  Havana  and  the  Isthmus  of  Panama;  while  a 
fourth  gave  service  from  Panama  to  California  and  Oregon. 
Of  these  subsidized  lines  the  one  established  by  Collins 
was  the  most  pretentious.  Collins  built  four  wooden,  pad- 
dle-wheel steamers,  the  Arctic,  Baltic,  Atlantic,  and  Pacific, 
each  of  them  having  a  tonnage  of  more  than  2,500,  and  in 


370  COMMERCE  AND  SHIPPING 

the  spring  of  1850  began  a  semi-monthly  service  between 
New  York  and  Liverpool,  for  which  the  Government  paid 
a  subsidy  of  $385,000  a  year.  The  service  was  better  than 
Collins  had  originally  agreed  to  maintain,  and  the  follow- 
ing year  the  subsidy  was  advanced  to  $858,000.  In  1855 
the  fifth  vessel  of  the  Collins  line,  the  Adriatic,  was  com- 
pleted. It  was  the  fastest  and  most  luxurious  steamship 
in  the  transatlantic  service. 

For  four  years  after  the  Collins  line  was  established  it 
competed  vigorously  with  the  rival  Cunard  line.  The 
American  ships  were  faster  and  more  comfortable  than 
the  British  vessels,  and  for  a  time  Collins  was  successful 
in  the  competitive  struggle.  Then  he  met  with  two  great 
misfortunes.  In  1854  the  Arctic  was  rammed  and  sunk 
in  a  fog  by  a  French  vessel,  near  Cape  Race,  and  only 
45  out  of  368  people  aboard  the  ship  were  saved.  Col- 
lins himself  lost  his  wife,  son  and  daughter  in  the  acci- 
dent. The  loss  of  this  vessel  made  it  impossible  for  him 
to  maintain  the  service  called  for  in  his  contract  with 
the  Government  and  the  amount  of  his  subsidy  was  re- 
duced. In  January,  1856,  the  Pacific  left  Liverpool  for 
New  York,  with  156  people  on  board,  and  was  never  heard 
from  again.  This  loss  was  a  crushing  blow,  and  during 
the  financial  panic  of  1857  Collins  was  forced  into  bank- 
ruptcy. 

Meanwhile  a  sentiment  against  steamship  subsidies  had 
arisen  in  Congress.  Southern  representatives  had  in  gen- 
eral voted  in  favor  of  subsidies  in  1845  and  1847,  but  now 
they  turned  against  them  because  the  benefit  had  gone  only 
to  Northern  shipbuilders  and  shipowners.  A  number  of 
shipowners  in  the  North  opposed  the  subsidy  policy,  be- 
cause it  favored  certain  individuals  and  discouraged  others. 
Many  shipowners  did  not  yet  believe  that  the  steamship 
would  ever  supplant  the  sailing  vessel  in  the  transportation 
of  ocean  freight.    In  1858  Congress  abandoned  the  subsidy 


COMMERCE  AND  SHIPPING  371 

policy  entirely  and  ceased  to  encourage  the  development  of 
American  steamship  lines  by  artificial  means.  The  re- 
maining vessels  of  the  Collins  line  were  sold  to  British 
companies,  and  American  owners  retired  from  the  trans- 
atlantic steamship  service,  leaving  the  field  to  their  rivals. 
The  service  between  New  York  and  Chagres,  on  the  Isthmus 
of  Panama,  and  between  Panama  and  Oregon  continued  to 
grow,  notwithstanding  the  withdrawal  of  the  subsidies, 
A  railroad  was  built  across  the  isthmus  and  a  number 
of  new  steamers  were  added  to  both  the  Atlantic  and  the 
Pacific  line. 

Another  change  was  taking  place  in  the  shipping  busi- 
ness which  boded  ill  for  American  interests.  This  was  the 
substitution  of  iron  for  wood  in  the  construction  of  the 
hulls  of  both  steamships  and  sailing  vessels.  American 
shipbuilders  had  been  able  to  build  ships  more  cheaply 
than  British  builders  chiefly  because  of  the  plentiful  sup- 
ply of  cheap  material  for  American  wooden  ships.  By 
using  iron  instead  of  wood  British  builders  obtained  the 
advantage  because  hulls  of  iron  could  be  built  more  cheaply 
in  England  than  in  the  United  States.  American  ship- 
ping interests  were  slow  to  recognize  the  superiority  of 
iron  over  wood  just  as  they  were  slow  to  realize  that 
steam  was  superior  to  sails.  By  their  unwillingness  to 
adopt  new  methods  and  devices  the  American  shipping  in- 
terests let  their  British  competitors  get  a  long  start  in  the 
race  for  marine  supremacy. 

Even  with  the  unfavorable  start,  the  American  shipping 
interests  might  eventually  have  regained  their  position  on 
the  sea  had  it  not  been  for  the  Civil  War.  During  this 
conflict  American  shipowners  were  placed  at  a  great  dis- 
advantage. When  the  struggle  was  over  the  British  were 
far  in  the  lead  in  the  shipping  business.  Moreover  new 
conditions  had  arisen  which  made  shipbuilding  and  ship 
operation  less  attractive  than  other  industries  in  America, 


372  COMMERCE  AND  SHIPPING 

Until  these  conditions  changed  the  revival  of  the  American 
merchant  marine  was  an  impossibility. 

Questions  and  Topics 

1.  Can  you  account  for  the  comparatively  slow  growth 
of  cities  in  the  South? 

2.  Is  the  United  States  now  raising  enough  wheat  and 
cattle  for  home  consumption? 

3.  To  what  causes  do  you  ascribe  the  slowness  of  the 
South  to  grasp  its  industrial  impossibilities? 

4.  Name  other  American  inventions  beside  the  steamboat 
that  have  been  perfected  and  successfully  utilized  by 
foreign  countries. 

5.  Did  the  development  of  the  clipper  ship  ultimately 
do  harm  or  good  to  American  shipping  interests?  Give 
reasons  for  your  opinion. 


CHAPTER  XIX 
THE  CIVIL  WAR 

Secession  and  War.  Notwithstanding  the  material  pros- 
perity of  the  nation  during  the  two  decades  following 
1840  the  period  witnessed  an  exceedingly  bitter  political 
struggle  between  the  people  of  the  North  and  the  people 
of  the  South.  This  struggle  culminated  in  1860,  shortly 
after  the  election  of  Abraham  Lincoln  to  the  presidency, 
when  a  South  Carolina  convention  passed  an  ordinance  of 
secession  declaring  the  Union  to  be  "dissolved."  Six 
other  States  soon  followed  South  Carolina's  lead,  and  in 
February,  at  a  meeting  held  in  Montgomery,  Alabama,  a 
provisional  government  of  the  "Confederate  States  of 
America"  was  organized.  All  endeavors  to  adjust  the 
differences  between  the  opposing  sections  of  the  country 
failed.  As  Lincoln  said  "One  of  them  would  make  war 
rather  than  let  the  nation  survive,  and  the  other  would 
accept  war  rather  than  let  it  perish,  and  the  war  came." 
Fort  Sumter  was  fired  on ;  Lincoln  promptly  called  for 
volunteers  to  suppress  the  insurrection;  four  more  States 
joined  the  Confederacy ;  and  the  great  war  was  under  way. 

Slavery  the  Cause  of  the  War.  Though  the  Civil  War 
was  not  fought  to  free  the  negro,  slavery  was  neverthe- 
less the  real  cause  of  the  war.  The  Southern  slavehold- 
ers for  years  waged  an  aggressive  fight  to  extend  the  slave- 
holding  area  of  the  United  States.  In  1854  Congress  un- 
wisely passed  the  Kansas-Nebraska  bill,  which  repealed  the 
Missouri  Compromise  of  1820  and  provided  that  the  in- 
habitants of  the  new  Territories  of  Kansas  and  Nebraska 

373 


374  CIVIL  WAR 

should  decide  for  themselves  whether  slavery  should  be 
permitted.     This  law  aroused  intense  resentment  in  the 


Abraham  J^incoln 
From  a  photograph  made  at  Sprinijfield  soon  after  his  nomination  for  President. 

North,  where  for  a  number  of  years  there  had  been  a 
steadily  growing  opposition  to  negro  slavery.  A  small 
but  extremely  active  group  of  radicals  had  taken  the  at- 


CIVIL  WAR  375 

titude  that  slavery  should  be  abolished  or  the  Union  dis- 
solved, but  these  extremists  were  not  popular.  There  was 
however  a  large  number  of  men  who,  while  not  seeking 
the  abolition  of  slavery,  earnestly  opposed  the  further  ex- 
tension of  the  institution.  After  the  enactment  of  the 
Kansas-Nebraska  bill  this  group  organized  the  Republican 
party,  with  the  purpose  of  resisting  to  the  utmost  the 
spread  of  slavery  into  the  Western  Territories. 

In  1857  the  Supreme  Court  declared,  in  the  famous 
Dred  Scott  decision,  that  Congress  did  not  have  the  con- 
stitutional authority  to  prohibit  slavery  in  any  Territory. 
If  Congress  had  no  such  power,  obviously  a  Territorial 
legislature,  inferior  to  Congress,  had  no  such  power.  The 
Republican  leaders  denounced  the  decision  as  a  "political 
manifesto,"  and  reaffirming  their  conviction  that  "free- 
dom" was  the  natural  condition  of  the  Territories,  denied 
the  "authority  of  Congress,  of  a  Territorial  legislature, 
or  of  any  individual  to  give  legal  existence  to  slavery  in 
the  Territories."  In  1860  the  Democratic  party  split 
asunder,  the  Southern  faction  demanding  the  recognition 
of  rights  of  slaveholders  as  defined  in  the  Dred  Scott  de- 
cision, the  Northern  faction  adhering  to  the  doctrine  of 
"popular  sovereignty"  as  embodied  in  the  Kansas- 
Nebraska  Act.  The  division  of  the  opposition  resulted  in 
a  Republican  victory.  The  Southern  leaders,  professing  a 
belief  that  the  Republicans  cherished  the  desire  not  only 
to  restrict  the  territorial  extension  of  slavery  but  also  to 
exterminate  slavery  in  the  States  where  it  had  a  legal  exist- 
ence, decided  to  destroy  the  Union. 

Slavery  and  the  South.  The  aggressive  slaveholders 
were  willing  to  destroy  the  Government  to  perpetuate  an 
institution  which  not  only  was  wicked  and  immoral,  but, 
from  an  economic  standpoint,  was  injurious  to  the  South. 
A  comparison  of  the  Northern  and  the  Southern  states  in 
1860  showed  that  the  former  had  far  outdistanced  the  latter 


376  CIVIL  WAR 

in  material  and  social  development.  The  population  of 
the  Northern  States  was  fifty  per  cent  greater  than  that 
of  the  Southern  States,  and  the  value  of  Northern  prop- 
erty was  almost  twice  as  great  as  the  value  of  Southern 
property.  The  census  of  1860  showed  that  the  wealth  pro- 
duced in  the  United  States  in  1859  had  a  value  of  $3,- 
736,000,000  of  which  only  $818,000,000  came  from  Southern 
industry.  The  great  natural  resources  of  the  South,  with 
the  exception  of  the  soil,  were  virtually  untouched.  In 
such  branches  of  industry  as  manufacturing,  banking  and 
transportation  the  South  took  little  interest.  The  great 
merchant  marine  of  the  United  States  was  owned  almost 
entirely  by  Northern  business  men.  The  South  was  de- 
ficient in  all  the  educational  facilities  which  make  for  the 
improvement  of  civilized  communities. 

Slave  labor  was  inefficient  and  wasteful.  The  system 
was  injurious  to  the  slaves  and  to  the  slaveholders.  In 
the  former  there  was  no  initiative,  no  foresight,  no  thrift, 
no  ambition;  in  the  latter  there  was  contempt  for  manual 
labor  and  a  desire  to  live  solely  by  the  industry  of  others. 
The  effective  labor  supply  of  the  South  was  small  in  pro- 
portion to  the  number  of  inhabitants.  There  were  too 
many  consumers  and  too  few  producers.  And  what  was 
even  worse  there  was  little  saving.  Since  the  wealthy  class 
of  the  South  consisted  almost  wholly  of  the  great  cotton 
planters,  the  accumulation  of  capital,  which  makes  in- 
dustrial progress  possible,  depended  upon  the  willingness 
of  this  class  to  save.  Unfortunately  the  planters  showed 
little  desire  to  cultivate  a  spirit  of  thrift.  Slavery  always 
fosters  a  spirit  of  extravagance.  The  planters  were 
prosperous,  but  their  prosperity  was  of  little  benefit  to 
their  community.  They  invested  their  surplus  in  addi- 
tional slaves  or  spent  it  to  maintain  a  life  of  luxurious 
ease.  The  backwardness  of  the  South  was  due  to  in- 
efficient labor  and  to  the  failure  to  accumulate  capital, 


CIVIL  WAR  377 

and  these  shortcomings  were  the  direct  results  of  negro 
slavery. 

Economic  Conditions  During  the  War.  The  conditions 
in  the  North  and  in  the  South  during  the  war  brought 
out  strongly  the  inherent  strength  of  the  one  section  and 
the  weakness  of  the  other.  At  first  the  war  caused  a 
sharp  crisis  in  the  North  because  of  the  great  losses  suffered 
by  merchants  who  had  sold  goods  on  credit  to  Southern 
purchasers.  The  depression  quickly  passed  however,  and 
under  the  stimulation  of  the  demand  for  food,  clothing 
and  munitions  for  the  use  of  the  large  armies  nearly  all 
branches  of  industry  became  exceedingly  active.  The 
States  north  of  the  Ohio  River  and  the  Mason  and  Dixon 
Line  had  little  physical  contact  with  the  war.  The  great- 
est battle  of  the  struggle  was  fought  in  southern  Pennsyl- 
vania, and  Morgan's  cavalry  raided  southern  Indiana  and 
Ohio,  but  on  no  occasion  did  hostile  armies  disturb  the 
productive  industries  of  the  North  to  any  appreciable  ex- 
tent. By  greater  use  of  farm  machinery  the  Northern 
Central  States  increased  their  crops  of  cereals  notwith- 
standing the  diversion  of  a  substantial  portion  of  the  labor 
force  to  the  army.  The  loss  of  the  Southern  market  was 
compensated  for  by  the  enlarged  market  abroad.  Manu- 
facturing industries  were  generally  prosperous,  with  the 
exception  of  the  cotton  mills,  which  were  handicapped  by 
a  shortage  of  raw  materials.  The  production  of  woolens, 
clothing,  boots  and  shoes,  firearms,  wagons,  and  agricultural 
machinery  went  on  at  a  more  rapid  rate  than  before  the 
war.  There  was  some  activity  even  in  the  construction 
of  new  railroads,  large  bodies  of  workmen  being  imported 
under  contract  from  Europe  and  from  Asia  to  supply 
the  need  for  unskilled  labor.  In  only  one  field  of  economic 
activity  did  the  North  lose  strength.  This  was  in  ship- 
ping. Confederate  cruisers,  some  of  which  were  built  in 
England,    roamed    the    seas    capturing    and    destroying 


378  CIVIL  WAR 

Northern  merchant  vessels.  High  rates  of  insurance  made 
the  operation  of  ships  under  the  American  flag  unprofit- 
able, and  many  owners  sold  their  vessels  to  foreign  ship- 
ping interests.  The  Government  took  over  a  large  number 
of  vessels  to  use  for  military  purposes.  When  the  war 
ended  the  American  merchant  marine  was  only  half  the 
size  it  had  been  when  the  war  began. 

While  the  North  prospered  the  South  was  ruined. 
The  South  had  long  been  dependent  upon  foreign  commerce 
and  upon  commerce  with  the  Northern  States  for  many 
articles  of  daily  use,  and  it  found  its  communication  with 
the  outside  world  almost  completely  cut  off.  One  of  the 
first  military  measures  of  the  Federal  authorities  was  to 
declare  a  blockade  of  the  entire  Southern  coast.  Within  a 
short  time  the  blockade  was  made  effective  by  squadrons 
of  armed  vessels  which  intercepted  any  ship  endeavoring 
to  enter  or  leave  a  Southern  port.  Forced  by  the  block- 
ade to  rely  upon  their  own  resources  the  Southern  people 
established  industries  for  the  manufacture  of  arms,  cloth- 
ing, munitions  and  transportation  eciuipment.  The  pro- 
duction which  they  were  able  to  maintain  was  wholly  in- 
adequate to  meet  either  military  or  civil  needs.  The  few 
Southern  railroads  soon  deteriorated  and  the  problem  of 
supplying  the  armies  in  the  field  became  increasingly  diffi- 
cult. During  the  latter  part  of  the  war  the  few  industrial 
centers  and  the  most  important  agricultural  districts  of 
the  South  were  devastated  by  Northern  armies,  the  factories 
burned,  railroads  torn  up,  stocks  of  food  seized,  slaves 
liberated  and  live  stock  driven  away  or  destroyed.  When 
Lee's  army  finally  surrendered  the  soldiers  were  scantily 
clad  and  were  weak  from  hunger.  The  South  was  literally 
exhausted. 

Civil  War  Finance.  The  methods  which  the  Federal 
Government  adopted  to  finance  the  great  war  belied  the 
economic  strength   of  the   Northern   States.     Once   again 


CIVIL  WAR  379 

the  fatal  mistake  was  made  of  relying  upon  credit  unsup- 
ported by  an  adequate  program  of  taxation.  The  Secre- 
tary of  the  Treasury,  Salmon  P.  Chase,  announced  at  the 
beginning  of  the  war  that  his  policy  would  be  to  pay  only 
the  ordinary  expenses  of  government  with  money  derived 
from  taxation  and  to  pay  the  cost  of  the  war  entirely  with 
borrowed  funds.  His  error  was  due  in  part  to  the  belief 
that  the  war  would  last  but  a  few  months,  but  it  was  due 
chiefly  to  his  ignorance  of  public  finance,  because  even 
when  it  became  evident  that  the  war  would  be  of  long 
duration  he  made  little  effort  to  change  his  early  policy. 
The  first  large  loan  of  $150,000,000  was  taken  in  the 
summer  of  1861  by  a  group  of  bankers  of  New  York,  Phil- 
adelphia and  Boston.  The  banks  paid  specie  into  the 
Federal  Treasury  in  regular  instalments,  the  money  was 
disbursed  by  the  Treasury  Department,  and  for  a  time  it 
was  redeposited  in  the  banks  by  those  who  received  it. 
Before  the  end  of  1861  the  reverses  suffered  by  Federal 
troops,  the  threatening  attitude  of  Great  Britain  and  the 
weak,  ineffectual  financial  program  announced  by  Chase 
awakened  serious  doubt  of  the  ability  of  the  Government 
to  weather  the  storm.  The  Union  was  meeting  its  supreme 
test,  and  the  outlook  was  anything  but  favorable.  Instead 
of  depositing  with  the  banks  the  specie  received  from  the 
Government  individuals  began  to  hoard  it.  Both  the  banks 
and  the  Government  were  then  compelled  to  suspend  specie 
payments.  Loans  were  unobtainable  except  at  exorbitant 
discounts.  Instead  of  adopting  a  policy  of  rigorous  taxa- 
tion, which  would  have  provided  revenue  and  strengthened 
the  credit  of  the  Government,  Congress,  with  Secretary 
Chase's  assent,  resorted  to  the  old  custom  of  issuing  paper 
money  redeemable  at  no  definite  date. 

The  first  issue  of  non-interest  bearing  notes  or  ''green- 
backs," amounting  to  $150,000,000  was  authorized  in  Feb- 
ruary,   1862.     A    second    issue    of   $150,000,000   came   in 


380 


CIVIL  WAR 


June.  Secretary  Chase  still  found  it  impossible  to  sell 
bonds  except  at  a  great  discount,  and  in  January,  1863, 
a  third  issue  of  $100,000,000  in  greenbacks  was  authorized 
to  pay  the  large  arrears  due  the  soldiers  in  the  field.  A 
fourth  and  last  issue  of  $50,000,000  was  made  in  March. 
The  greenbacks  were  made  legal  tender  in  payment  of  all 
debts  except  duties  on  imports  and  interest  on  the  public 
debt.     For  a  time  the  holders  of  the  notes  had  the  privi- 


Salmon  P.  Chase 


lege  of  exchanging  them  for  long-term  interest  bearing 
bonds,  but  this  privilege  was  taken  away  in  1863.  The 
notes  were  merely  promises  of  the  Government,  payable 
nobody  could  say  when.  In  addition  to  the  greenbacks 
the  Treasury  issued  large  quantities  of  interest-bearing 
notes  of  small  denomination,  which  circulated  as  currency. 
In  1862  and  1863  Secretary  Chase,  with  the  help  of  Jay 
Cooke,  a  Philadelphia  banker,  succeeded  in  selling  directly 
to   the  people  long-term  bonds  to  the  amount  of  $400,- 


CIVIL  WAR  381 

000,000.  Again  in  1865,  when  William  P.  Fessenden  was 
head  of  the  Treasury  Department,  Cooke  and  his  agents 
marketed  several  million  dollars'  worth  of  long-term  bonds. 
But  of  the  total  loans  placed  by  the  Government  during 
the  four  years  of  the  war,  sixty  per  cent  consisted  of  short- 
time  notes  and  greenbacks. 

It  was  not  until  June,  1864,  that  Congress  adopted  a 
vigorous  policy  of  taxation.  Duties  on  imports  were 
raised  slightly  in  August,  1861,  and  an  income  tax  law 
passed  to  take  effect  ten  months  later.  In  1862  a  large 
number  of  moderate  internal  taxes  were  levied  and  com- 
pensatory increases  made  in  import  duties.  But  in  1862- 
63  when  the  expenses  of  the  Government  reached  the  large 
total  of  $718,733,000  the  receipts  from  taxation  were  but 
little  more  than  $100,000,000.  In  1864  the  internal  taxes 
were  increased  to  such  an  extent  that  the  receipts  from 
these  duties  alone  amounted  to  $209,464,000  in  1865  and 
to  $309,366,000  in  1866.  Taxes  were  laid  on  spirituous 
liquors,  malt  liquors,  tobacco,  manufactured  products  of 
all  kinds,  slaughtered  live  stock,  railroads,  steamboats, 
banking  institutions  and  insurance  companies.  No  in- 
dustry and  no  occupation  escaped  taxation.  The  duties  on 
imports  were  also  greatly  increased  to  give  adequate  pro- 
tection to  those  industries  which  were  subjected  to  heavy 
internal  taxes. 

Depreciation  of  the  Paper  Currency.  The  suspension 
of  specie  payments  by  the  banks  and  by  the  Government 
and  the  subsequent  issue  of  large  quantities  of  irredeem- 
able notes  were  followed  by  the  usual  result — the  deprecia- 
tion of  the  paper  currency  as  compared  with  specie.  De- 
preciation set  in  almost  at  once  after  the  first  legal  tenders 
were  issued  and  as  the  amount  of  paper  currency  out- 
standing increased  in  volume  it  depreciated  more  and  more 
until  in  the  summer  of  18G4  the  promises  of  the  Gov- 
ernment were  worth  less  than  forty  cents  on  the  dollar. 


382  CIVIL  WAR 

Specie  disappeared  from  circulation  entirely  except  in  Cal- 
ifornia where  the  people  refused  to  use  paper  money. 
Even  the  fractional  coins  were  hoarded  or  exported.  To 
supply  the  need  for  small  change  the  Treasury  issued 
several  million  dollars  of  fractional  paper  currency.  Gold 
was  used  to  pay  duties  on  imports,  to  pay  the  interest 
on  the  public  debt,  and  to  settle  international  balances. 
A  market  for  the  purchase  and  sale  of  gold,  that  is,  for 
the  exchange  of  gold  for  circulating  paper  currency,  was 
established  in  New  York  City  in  1862  and  maintained 
until  the  Government  resumed  specie  payments  in  1879. 
This  "gold  exchange"  became  one  of  the  scandals  of  the 
war  when  unpatriotic  speculators  endeavored  to  manipu- 
late the  gold  market  for  their  private  gain.  With  a  de- 
preciated currency  some  kind  of  gold  market  was  indis- 
pensable, in  order  that  those  transactions,  in  which  only 
gold  could  be  used,  might  be  carried  out,  but  the  public 
need  was  made  to  serve  the  dishonest  purposes  of  un- 
scrupulous gamblers. 

The  worst  effect  of  the  depreciated  currency  was  the 
great  rise  in  the  prices  of  all  commodities  without  a  cor- 
responding increase  in  wages  and  salaries.  The  Govern- 
ment paid  its  soldiers  $13  a  month  until  May,  1864,  when 
the  rate  was  increased  to  $16.  But  even  after  the  increase 
was  effected  the  monthly  stipend  of  the  soldier  was  ex- 
changeable for  less  than  one-half  the  commodities  which 
an  equal  number  of  dollars  would  have  purchased  when  the 
war  began.  All  classes  of  labor  in  civil  life  saw  their  real 
wages  steadily  decline,  while  those  who  had  goods  to  sell, 
and  especially  those  who  sold  supplies  to  the  Government, 
reaped  great  fortunes.  It  has  been  estimated  that  the 
money  cost  of  the  war  was  made  twenty-five  per  cent 
greater  by  the  depreciation  of  the  currency  and  the  col- 
lapse of  the  nation's  credit.  This  did  not  mean  that  the 
war  cost  more  in  wealth  and  lives,  except  to  the  extent 


CIVIL  WAR  383 

that  financial  mismanagement  prolonged  the  struggle.  It 
meant  that  the  cost  was  inequitably  distributed,  the 
heaviest  burdens  falling  upon  the  soldiers,  the  wage  earn- 
ers and  the  salaried  classes.  Debts  which  the  Government 
contracted  when  the  currency  was  worth  forty  and  fifty 
cents  on  the  dollar  were  settled  later  with  currency  worth 
seventy-five  to  one  hundred  cents  on  the  dollar,  the  for- 
tunate creditor  pocketing  the  difference.  Untaxable  bonds 
sold  at  a  large  discount  were  subsequently  paid  off  at  par 
or  better,  the  tax-payer  yielding  forced  tribute  to  the 
bondholder.  Not  only  did  the  irredeemable  paper  money 
cause  hardship  and  suffering  while  the  war  was  in 
progress;  it  was  retained  as  a  permanent  part  of  the 
national  currency,  and  for  more  than  a  quarter  of  a 
century  was  a  prolific  source  of  financial  disorder. 

Important  Results  of  the  War;  the  End  of  Slavery. 
The  Civil  War  was  in  some  respects  a  turning  point  in 
the  history  of  the  United  States  because  it  brought  about 
changes  which  were  to  have  a  profound  influence  upon  the 
subsequent  course  of  economic  development.  Many  steps 
which  the  Government  took  to  bring  the  war  to  a  suc- 
cessful conclusion  had  results  of  much  greater  importance 
than  their  effect  upon  the  military  situation. 

A  wholly  unexpected  result  of  the  war  was  abolition  of 
slavery.  There  were  few  people  who  would  have  ventured 
to  predict  in  1861  that  the  Government  would  disturb  this 
institution.  Lincoln  said  in  his  second  inaugural  address, 
''Neither  party  anticipated  that  the  cause  of  the  conflict 
might  cease  before  the  conflict  itself  should  cease.  Each 
looked  for  an  easier  triumph,  and  a  result  less  fundamental 
and  astounding."  In  his  first  inaugural  address  he  had 
quoted  from  one  of  his  former  speeches:  ''I  have  no  pur- 
pose, directly  or  indirectly,  to  interfere  with  the  institu- 
tion of  slavery  in  the  States  where  it  exists.  I  believe  I 
have  no  lawful  right  to  do  so,  and  I  have  no  inclination  to 


384  CIVIL  WAR 

do  so."  He  issued  his  emancipation  proclamation  by 
virtue  of  his  war  power  as  commander-in-chief  of  the  mili- 
tary forces  of  the  nation,  only  after  he  had  given  prelim- 
inary warning  of  his  intention  of  setting  free  on  January 
1,  1863,  all  slaves  in  States  ''the  people  whereof  shall  then 
be  in  rebellion  against  the  United  States,"  Though  the 
emancipation  proclamation  did  not  technically  set  all  the 
negro  slaves  free,  it  liberated  the  majority  of  them  and 
made  complete  abolition  a  certaint3\ 

A  New  Tariff  Policy.     One  of  the  most  surprising  re- 
sults of  the  war  was  a  complete  change  in  the  tariff  policy' 
of  the  United  States.     The  decline  of  foreign  imports  after 
the  panic  of  1857  had  caused  a  deficit  in  the  Treasury,  and 
in  1861,  just  before  Buchanan's  administration  ended,  a 
new  tariff  law,  the  Morrill  Act,  was  passed.     This  meas- 
ure was  designed  to  increase  the  revenues  of  the  Govern- 
ment, and  it  also  gave  moderate  protection  to  manufac- 
tures,  but   it  was  in   no   sense   a  high   protective  tariff. 
While  the  war  was  in  progress  the  duties  on  all  imports 
were   greatly   increased.     The    purpose    of   the    increased 
duties  was  partly  to  obtain  added  revenue  and  partly  to 
give   the   protection   necessary   to   offset   the   high   direct 
taxes  imposed  on  manufacturing  industries.     In  the  tariff 
act  of  1864  the   average  rate  of  duties  on   imports  was 
raised  to  47  per  cent.     The  bill  was  discussed  but  three  days 
in  the  House  of  Representatives  and  but  two  days  in  the 
Senate.     Nobody    thought    that    it    represented    a    funda- 
mental change  in  the  tariff  policy  of  the  country.    After  the 
war  ended  Congress  removed  nearl^^  all  the  internal  taxes 
which  had  been  levied  to  pay  the  large  expenses  of  the 
Government,  but  did  not  make  any  reduction  in  the  tariff 
duties.     The  South  had  been  strongly  opposed  to  protect- 
ion,  but  the   South   had   no   representation    in   Congress, 
when  the  taxation  laws  were  revised.     The  Northern  op- 
ponents of  the  protective  policy  could  not  muster  sufficient 


CIVIL  WAR  385 

strength  to  defeat  the  demands  of  the  beneficiaries  of  high 
tariffs.  As  an  incident  of  war  the  nation  reversed  its  tariff 
policy  and  became  committed  to  a  system  of  protection 
far  in  excess  of  any  demands  which  had  ever  been  made 
under  normal  conditions  of  peace.  The  new  policy  made 
manufacturing  more  profitable  than  it  had  ever  been  be- 
fore and  did  much  to  hasten  industrial  development. 

The  National  Banking  System.  Another  incident  of  the 
war  was  the  establishment  of  the  national  banking  system. 
Secretary  Chase,  in  his  annual  report  of  1861,  suggested 
that  Congress  undertake  the  regulation  of  the  banking  busi- 
ness. At  that  time  there  were  more  than  1600  banking 
institutions  in  existence  which  had  power  to  issue  notes 
under  various  State  regulations.  The  abuse  of  the  power  to 
issue  bank-notes  had  on  more  than  one  occasion  caused  seri- 
ous financial  disturbances.  Secretary  Chase  renewed  his 
recommendations  in  1862.  At  that  time  there  were  more 
than  7,000  different  kinds  of  bank-notes  in  circulation,  not 
counting  several  thousand  varieties  of  counterfeit  and  al- 
tered notes.  Some  of  this  currency  had  a  small  specie 
reserve  back  of  it,  some  was  secured  by  State  bonds  and 
other  securities,  but  most  of  it  was  based  upon  assets  of  a 
questionable  character  or  upon  no  assets  whatever.  Chase 
thought  it  was  time  for  the  country  to  have  a  safe  and  uni- 
form bank-note  currency.  Under  his  plan  the  notes  of 
the  national  banks  were  to  be  secured  by  Government  bonds 
deposited  in  the  Federal  Treasury.  The  fact  that  the 
national  banking  system  would  create  a  market  for  bonds 
was  a  strong  reason  for  establishing  the  system. 

A  law  to  establish  a  national  banking  system  was  enacted 
in  February,  1863.  The  act  provided  for  the  formation  of 
national  banking  associations.  Each  association  was  to  buy 
Government  bonds,  and  upon  depositing  the  bonds  with  the 
treasurer  of  the  United  States  would  receive  in  exchange 
circulating  notes  to  the  amount  of  90  per  cent  of  the  market 


386  CIVIL  WAR 

value  of  the  bonds.  The  law  was  revised  in  1864  and  addi- 
tional inducements  offered  for  the  organization  of  new 
national  banking  associations  and  for  the  transformation 
of  State  banks  into  national  banks.  The  advantages  of  the 
new  currency  were  at  once  apparent,  and  it  was  suggested 
that  the  State  banks  be  required  to  withdraw  all  their  notes 
from  circulation.  To  accomplish  this  end  Congress,  in 
1865,  imposed  an  annual  tax  of  10  per  cent  upon  the  issues 
of  all  State  banks,  thereby  giving  the  national  banks  a 
monopoly  of  the  note  issuing  privilege.  The  national 
banks  accomplished  the  results  expected  of  them.  They 
afforded  a  good  market  for  Government  bonds  and  they 
supplied  the  country  with  a  uniform  bank-note  currency. 
The  chief  defect  of  the  national  banking  system  was  that 
it  did  not  furnish  a  currency  which  expanded  and  con- 
tracted in  response  to  the  needs  of  trade.  But  a  safe  cur- 
rency, even  if  inelastic,  was  superior  to  a  currency  which 
was  constantly  in  danger  of  undue  inflation. 

Land  Grants  to  Railroads.  When  the  Civil  War  began 
there  was  no  railroad  extending  from  the  Eastern  States 
to  the  Pacific  coast.  For  a  number  of  years  the  construc- 
tion of  a  transcontinental  railroad  had  been  urged,  and  all 
political  parties  had  advocated  its  construction,  if  need 
be,  at  Federal  expense.  The  chief  obstacle  to  building  the 
road  was  the  inability  of  Congress  to  decide  the  matter  of 
location.  The  Southern  members  of  Congress  wanted  it  to 
extend  from  New  Orleans  through  Texas  and  New  Mexico, 
while  Northern  members  wanted  the  line  entirely  in  free 
territory.  The  war  emphasized  the  need  of  a  transconti- 
nental railroad  to  unite  California  with  the  loyal  States 
of  the  East,  and  in  1862  Congress  took  steps  to  have  a 
line  built.  A  Federal  charter  was  given  to  the  Union 
Pacific  Railroad  Company,  which  was  authorized  to  con- 
struct a  road  westward  from  Omaha,  Nebraska.  The  Cen- 
tral Pacific  Railroad  Company,  a  California  corporation, 


CIVIL  WAR  387 

was  authorized  to  build  eastward  from  Sacramento.  To 
both  companies  Congress  gave  large  grants  of  Western 
lands  and  loaned  large  sums  of  money,  L/ater,  other  corp- 
orations organized  to  build  railroads  west  of  the  Mississippi 
River,  also  received  liberal  grants  of  land.  The  sparsely 
settled  region  through  which  the  early  transcontinental 
lines  were  constructed  gave  promise  of  little  immediate 
traffic,  and  private  capitalists  could  not  afford  to  under- 
take the  building  of  the  roads  at  their  own  risk.  By  giv- 
ing liberal  subsidies  the  Government  made  early  con- 
struction possible  and  thus  opened  up  Western  lands  to 
settlement.  The  land  grants  resulted  in  a  rapid  develop- 
ment of  the  Far  West. 

The  Homestead  Act.  Of  equal  importance  with  the  leg- 
islation giving  large  tracts  of  public  land  to  corporations 
undertaking  the  construction  of  transcontinental  railroads 
was  the  Homestead  Law,  enacted  in  1862,  by  which  Con- 
gress offered  a  quarter-section  of  public  land,  free  of  cost, 
to  any  citizen  who  would  occupy  the  land  and  maintain  a 
residence  for  at  least  five  years.  Soldiers  taking  advantage 
of  the  law  were  permitted  to  count  the  time  of  their  service 
in  the  army  as  part  of  the  five  years.  This  law  marked 
the  culmination  of  several  years  of  effort  to  enact  legisla- 
tion for  the  free  distribution  of  Western  lands.  As  early 
as  1845  a  homestead  bill  was  introduced  in  Congress  and 
on  several  occasions  homestead  bills  passed  the  House  of 
Representatives  only  to  be  defeated  in  the  Senate.  The 
South  opposed  the  free  distribution  of  land  because  most  of 
the  lands  offered  would  be  taken  by  free  white  settlers. 
In  1860  a  bill,  similar  in  nearly  all  respect  to  the  law  en- 
acted in  1862,  except  that  it  required  a  cash  payment  of 
25  cents  an  acre,  was  passed  by  both  Houses  of  Congress, 
but  it  was  vetoed  by  President  Buchanan  chiefly  on  the 
ground  that  a  policy  of  free  distribution  of  public  land 
would  stimulate  emigration  to  the  West  and  cause  a  fall  in 


388  CIVIL  WAR 

land  values  in  the  East.  He  also  thought  it  would  be  an 
unfair  discrimination  against  the  settlers  who  had  paid 
$1.25  or  more  for  their  holdings. 

Under  the  Homestead  Law  thousands  of  settlers  took  up 
farms  in  the  West.  When  the  great  war  ended  the  multi- 
tudes of  discharged  soldiers  were  absorbed  into  the  civil 
population  with  little  difficulty.  Immigrants  who  de- 
clared their  intention  to  become  citizens  were  permitted  to 
take  homesteads  under  the  law,  and  a  large  number  of 
European  peasants  and  artisans  came  to  America  to  settle. 
Workmen  in  Eastern  factories  and  stores  gave  up  their  oc- 
cupations to  "go  out  West"  and  earn  a  fortune  from  the 
soil.  The  new  land  policy  caused  the  center  of  population 
and  industry  to  shift  westward.  The  value  of  Eastern 
lands  declined  somewhat  for  a  time  and  the  Government 
lost  some  revenue  by  giving  the  land  away,  but  the  net 
result  was  an  enormous  increase  in  the  wealth  and  pros- 
perity of  the  nation. 

Conditions  at  the  Close  of  the  War.  The  war  ended 
with  conditions  favorable  for  a  rapid  industrial  expansion. 
The  Union  had  survived  a  heroic  test;  and  a  spirit  of 
unbounded  confidence  in  the  permanence  and  stability  of 
the  Government  pervaded  the  entire  country.  Negro 
slavery,  the  institution  which  had  divided  the  nation  into 
sections  having  strongly  antagonistic  economic  and  social 
ideals,  was  destroyed.  A  great  abundance  of  virgin  land 
was  opened  for  settlement.  New  facilities  for  transporta- 
tion made  available  vast  stores  of  natural  resources  the 
abundance  and  value  of  which  the  nation  was  only  be- 
ginning to  realize.  The  high  tariff  duties  held  visions  of 
large  profits  for  manufacturers.  Finally  the  nation  had 
learned  to  do  things  in  a  "big  way."  The  Civil  War  it- 
self was  the  greatest  enterprise  which  had  ever  been  con- 
ducted in  the  country,  involving  more  men  and  more  wealth 
than  any  undertaking  ever  before  attempted.     The  accom- 


CIVIL  WAR  389 

plishment  of  the  huge  industrial  tasks  which  the  successful 
prosecution  of  the  war  had  made  necessary  inspired  a  spirit 
of  confidence  in  the  ability  of  the  nation  to  achieve  tasks 
of  still  greater  scope. 

Questions  and  Topics 

1.  Why  did  not  South  Carolina's  attempt  to  nullify  the 
Tariff  Act  of  1832  prove  as  serious  as  its  stand  in  1860? 

2.  Make  a  list  of  some  books  and  poems  on  the  subject  of 
slavery. 

3.  Write  a  sketch  of  the  political  life  of  Lincoln. 

4.  Did  slavery  have  anything  to  do  with  the  low  stand- 
ard of  education  in  the  South? 

5.  Compare  the  financing  of  the  Civil  War  and  of  the 
War  of  1812. 

6.  Compare  the  natural  resources  at  the  disposal  of  the 
South  with  those  of  the  North. 

7.  Why  was  the  Homestead  Law  superior  to  earlier  legis- 
lation concerning  public  lands? 

8.  Why  do  you  think  it  has  been  recently  said  that  the 
slogan,  "Go  West,  young  man,"  might  well  be  changed  to 
"Go  South,  young  man"? 

9.  Describe  the  effects  of  slavery  on  some  other  country 
where  it  existed  or  exists. 


CHAPTER  XX 
EXPANSION;  SPECULATION;  CRISIS.     1865-1873 

The  Westward  Movement.  The  Civil  War  impeded  but 
did  not  entirely  interrupt  emigration  to  the  West,  and  as 
soon  as  hostilities  ended  the  westward  movement  set  in 
with  redoubled  vigor.  The  number  of  foreign  immigrants 
entering  the  United  States  in  1863  was  greater  than  the 
number  which  came  in  any  of  the  three  years  immediately 
preceding  the  war.  After  1863  immigration  rapidly  in- 
creased until  in  1873  the  number  of  aliens  landing  on  the 
shores  of  the  United  States  reached  460,000.  A  large  part 
of  the  incoming  foreigners  made  their  way  to  the  free  lands 
of  the  West,  and  as  before  the  war,  many  inhabitants  of 
the  older  States  in  the  East  sought  new  homes  on  the  west- 
ern plains.  The  number  of  people  in  Iowa,  Kansas,  Ne- 
braska, Wisconsin  and  JMinnesota  doubled  between  1860 
and  1870,  and  the  wave  of  migration  began  to  spread  across 
the  Territory  of  Dakota.  In  1869  the  nation's  wheat  crop 
was  262,000,000  bushels,  and  in  1870  the  corn  crop  for  the 
first  time  exceeded  a  billion  bushels.  Better  types  of  farm 
implements  came  into  use  to  increase  the  effectiveness  of 
farm  labor.  A  reaper  was  devised  which  permitted  men 
riding  on  the  machine  to  bind  wheat  as  it  was  cut,  and 
experiments  were  made  which  foretold  the  coming  of  the 
automatic  binder.  A  large  part  of  the  threshing  was  ac- 
complished by  steam  power. 

Railroad  Construction.  The  chief  factor  in  the  rapid 
settlement  of  the  West  was  the  extension  of  the  railway 
system.     In  the  eight  years  following  1865  the  railway  net 

390 


THE  CRISIS  OF  1873 


391 


of  the  United  States  was  doubled,  35,000  miles  of  new  lines 
being  constructed,  the  larger  part  of  which  was  built  in  the 
States  and  Territories  west  of  the  Mississippi.  Among  all 
the  economic  activities  of  the  country  none  commanded 
more  attention  during  these  eight  years  than  the  construc- 
tion of  new  railroads.  The  railroads  absorbed  more  capi- 
tal than  any  other  single  industry  and  they  had  the  most 
influence    upon   the    general    trend    of    business    activity. 


Completion  of  the  Union  Pacific  Railroad 

Throughout  the  war  and  for  three  or  four  years  after- 
wards railway  earnings  were  exceptionally  large,  and  little 
difficulty  was  experienced  in  obtaining  capital  for  new 
construction.  European  investors  bought  American  rail- 
road securities  in  large  quantities. 

The  most  significant  feature  of  railroad  history  was  the 
completion  of  the  first  transcontinental  line  in  1869,  when 
the  tracks  of  the  Union  Pacific  and  Central  Pacific  com- 
panies met  at  Promontory  Point,  a  few  miles  west  of  Ogden, 


392 


THE  CRISIS  OF  1873 


Utah.  For  five  years  the  construction  of  the  Union  Pacific 
had  been  going  on,  the  line  following  the  valley  of  the 
Platte  River  through  Nebraska,  and  threading  through  the 
mountains  of  southern  Wyoming.  Large  groups  of  Irish 
laborers  were  imported  to  do  the  work  of  grading  and  lay- 
ing track.  While  the  Union  Pacific  forces  were  pushing 
westward  the  Central  Pacific  organization,  with  hundreds 


George  M.  Pullman 
Copyright,  James  T.  White  <6  Co. 

of  Chinese  coolies,  was  laying  rails  over  the  Sierra  Nevada 
Mountains  and  across  Nevada.  Since  the  amount  of  land 
received  by  each  corporation  depended  upon  the  mileage  of 
track  constructed,  both  companies  put  forth  efforts  to  lay 
as  much  track  as  humanly  possible.  At  last  on  May  10, 
1869,  the  two  lines  were  joined.  The  last  ties  and  rails 
were  laid  and  the  last  spikes  driven,  a  spike  of  gold  from 
California,   a  spike   of  silver  from  Nevada,   and  one  of 


THE  CRISIS  OF  1873  393 

silver,  gold  and  iron  from  Arizona.  Leading  officials  of 
both  railroad  companies  took  part  in  the  final  celebration 
at  Promontory  Point,  while  distinguished  guests  invited  for 
the  occasion,  groups  of  European  and  Oriental  laborers,  a 
detachment  of  soldiers  from  Fort  Douglas,  and  groups  of 
curious  Indians  and  Mexicans  looked  on.  Telegraphic 
messages  informed  the  East  and  the  West  of  the  progress 
of  the  ceremonies  which  marked  the  completion  of  the 
great  work,  and  the  word  that  the  final  spike  had  been 
driven  was  a  signal  for  a  general  celebration  throughout 
the  country. 

The  steady  extension  of  other  railroad  systems  bore  wit- 
ness to  the  fact  that  the  occupation  of  the  West  was  an  ac- 
complished fact.  The  Northern  Pacific,  the  St.  Paul,  the 
Burlington,  the  Kansas  Pacific,  the  Missouri  Pacific,  the 
Santa  Fe,  the  Iron  Mountain,  and  the  Southern  Pacific  pen- 
etrated the  unsettled  region  beyond  the  Mississippi  and 
Missouri  Kivers  and  opened  the  way  for  the  oncoming  host 
of  farmers  and  cattle  rangers. 

Important  Changes  in  the  Railroad  Service.  While  the 
railroad  net  was  spreading  across  the  continent  a  number 
of  important  changes  in  railroad  operation  and  manage- 
ment were  taking  place  to  increase  the  efficiency  of  the 
transportation  system.  In  1864  George  Pullman  built  his 
first  sleeping  car,  the  Pioneer  A ;  and  in  1868  George  West- 
inghouse  gave  a  successful  demonstration  of  his  air-brake 
on  a  passenger  train  of  the  Pennsylvania  Railroad.  This 
air-brake  was  not  automatic  in  its  operation,  that  is,  it 
would  not  act  if  the  train  accidentally  broke  in  two,  but  by 
1872  the  inventor  devised  an  automatic  brake  which  could 
be  used  on  passenger  trains.  The  early  air-brakes  were 
not  adapted  for  use  on  freight  trains  because  they  were  too 
slow  in  action.  Another  invention  of  this  period  was  the 
Janney  automatic  safety  coupler. 

More  important  even  than  these  new  inventions  were  the 


394  THE  CRISIS  OF  1873 

steps  taken  to  secure  better  railroad  service  over  long  dis- 
tances. In  1869,  the  Pennsylvania  Railroad  Company 
leased  the  Pittsburgh,  Fort  Wayne  and  Chicago  road, 
thereby  obtaining  a  direct  line  from  Philadelphia  to  Chi- 
cago. A  few  years  later  the  Pennsylvania  also  obtained 
control  of  the  United  Companies  of  New  Jersey,  securing 
a  terminal  in  Jersey  City.  Commodore  Vanderbilt,  the 
president  and  chief  stockholder  of  the  Hudson  River  Rail- 
road, brought  about  the  consolidation  of  this  line  with  the 
New  York  Central  in  1869,  and  the  same  year  he  obtained 
control  of  the  Lake  Shore  and  Michigan  Southern  between 
Buffalo  and  Chicago.  The  Erie  was  consolidated  with  the 
Western  and  Atlantic  Railroad,  which  was  built  from  Sala- 
manca, New  York,  to  Cincinnati,  during  the  Civil  War. 
The  Baltimore  and  Ohio,  by  construction  of  new  lines  and 
purchase  of  existing  lines,  extended  its  rails  towards  Cin- 
cinnati and  Chicago. 

In  many  instances  where  the  consolidation  of  connecting 
lines  under  single  ownership  was  not  feasible  the  railway 
service  was  improved  by  the  adoption  of  cooperative  meth- 
ods. Connecting  lines  were  built  between  city  terminals, 
and  union  passenger  stations  constructed  in  several  cities. 
The  great  increase  in  the  movement  of  freight  over  East- 
ern roads  during  the  war  had  so  emphasized  the  need  for 
a  ''through  freight  service"  that  a  number  of  fast  freight 
lines  were  organized.  These  lines  were  companies  which 
owned  their  own  cars  and  freight-houses,  solicited  traffic, 
and  collected  charges.  They  had  no  railroads,  but  would 
pay  connecting  roads  to  haul  their  cars,  thus  doing  away 
with  the  expensive  necessity  of  transferring  freight  from 
car  to  car  when  it  passed  from  one  line  to  another.  The 
consolidation  of  connecting  lines  tended  to  eliminate  the 
need  for  fast  freight  lines,  and  in  time  they  were  dissolved 
and  their  equipment  sold  to  the  railroad  companies. 


THE  CRISIS  OF  1873  395 

Another  effort  to  improve  the  railroad  service  was  to  be 
found  in  the  movement  for  the  adoption  of  a  uniform  gauge 
for  all  the  railroads  of  the  country.  The  gauge  chosen 
for  the  Union  Pacific  was  4  feet  81/2  inches,  and  this  gauge 
was  adopted  by  nearly  all  other  Western  lines.  Some  of 
the  Eastern  roads  had  been  constructed  with  this  gauge, 
and  other  lines  began  to  adopt  it  in  the  interest  of 
uniformity. 

Manufacturing.  Throughout  the  war  large  quantities  of 
new  capital  were  invested  in  Northern  industries,  and  when 
the  war  ended  virtually  all  the  industries  of  the  country 
continued  to  prosper.  The  Southern  market  for  Northern 
factory  products  was  in  part  restored,  and  the  West  made 
larger  and  larger  demands  for  Eastern  goods.  Textiles, 
flour,  meats  and  other  provisions,  farm  implements,  vehi- 
cles, boots  and  shoes,  factory  machinery  and  railroad  equip- 
ment were  produced  in  great  quantities.  The  inventive 
genius  of  the  American  people  was  displayed  in  the  large 
number  of  patents  granted  by  the  Patent  Office.  From 
1867  to  1873  the  number  of  patents  taken  out  averaged 
more  than  13,000  a  year.  JNIost  of  the  new  inventions  were 
improvements  of  one  kind  or  another  upon  existing  devices. 
All  machine  processes  in  industry  were  being  brought 
nearer  to  a  state  of  perfection. 

The  most  important  event  in  the  history  of  manufactur- 
ing in  the  United  States  during  the  period  of  war  and  re- 
construction was  the  beginning  of  the  manufacture  of 
Bessemer  steel.  The  manufacture  of  low-carbon  steel  had 
always  been  a  slow  and  expensive  process.  Bessemer  dis- 
covered a  method  which  is  comparatively  simple.  Molten 
cast  iron  is  placed  in  a  huge  retort  and  a  violent  blast  of 
air  forced  through  the  liquid  metal.  The  oxygen  of  the  air 
burns  out  all  the  carbon  leaving  wrought  iron.  This  is 
quickly  transformed  into  steel  by  the  addition  of  the  exact 


396  THE  CRISIS  OF  1873 

amount  of  carbon  necessary  to  bring  about  the  proper 
physical  and  chemical  changes.  The  molten  mass  is  then 
poured  into  molds  to  cool. 

Few  inventions  have  had  a  more  marked  effect  upon  in- 
dustry than  the  invention  which  made  cheap  steel  a  possi- 
bility. The  wearing  qualities  of  wrought  iron  were  insuf- 
ficient to  meet  the  needs  of  the  expanding  manufacturing 
and  transportation  industries  of  1865,  and  until  the 
Bessemer  process  of  making  steel  was  introduced  steel  was 
much  too  expensive  to  be  used  in  making  ordinary  tools 
and  mechanical  appliances.  The  railroads  in  particular 
illustrated  the  need  for  a  more  durable  metal  than  wrought 
iron.  Before  1850  the  iron  rails  bore  the  weight  of  the 
light  American  locomotives  and  cars  with  little  difficulty. 
But  as  traffic  increased  the  railroads  used  larger  cars  and 
heavier,  faster  locomotives.  Many  of  the  locomotives  used 
on  American  roads  in  1860  weighed  25  tons  and  more,  as 
compared  with  the  eight  or  ten  ton  locomotives  used  a 
score  of  years  previously.  The  best  passenger  cars  of  1860 
were  60  feet  in  length  and  weighed  18  tons  empty.  Though 
freight  cars  were  still  relatively  small  their  weight  loaded 
of  16  to  18  tons  was  three  times  the  weight  of  the  loaded 
cars  of  1840.  By  1870  locomotives  of  forty  tons  and  pas- 
senger cars  of  nearly  equal  weight  were  in  use  on  Eastern 
railroads.  The  heavy  trains  wore  out  the  soft  iron  rails 
very  rapidly.  In  passenger  terminals  where  trains  en- 
tered and  left  with  considerable  frequency  it  was  necessary 
to  lay  new  rails  two  and  three  times  a  year.  In  January, 
1868,  the  Erie  Railroad  Company  removed  a  thousand 
broken  rails  from  its  tracks  between  Jersey  City  and  Sala- 
manca, in  addition  to  several  thousand  rails  which  were 
crushed  or  worn  out.  The  weakness  of  the  iron  rails 
caused  a  number  of  distressing  accidents  which  aroused 
much   popular  indignation   against   the   railroads.     There 


THE  CRISIS  OF  1873  397 

was  a  general  demand  that  a  stronger  and  more  durable 
material  be   used   in   railroad   construction. 

In  1862  Bessemer  demonstrated  that  steel  rails  were 
twenty  times  as  durable  as  the  best  iron  rails  then  made. 
The  following  year  the  Pennsylvania  Eailroad  imported 
150  steel  rails  from  England  and  made  tests  which  indi- 
cated their  great  superiority.  The  president  of  the  rail- 
road company,  in  his  annual  report  of  1864,  commented 
most  favorably  upon  the  new  rails  but  expressed  the  fear 
that  the  high  cost  would  make  their  general  use  impossible. 
The  obstacle  of  expense  was  soon  removed  however  by  im- 
provements in  the  mechanical  processes  of  steel  manufac- 
ture. In  1865  the  first  American  steel  rails  were  rolled  in 
the  Chicago  Rolling  ]\Iill  from  ingots  made  at  an  iron  mill 
in  Wyandotte,  Michigan.  The  same  year  the  Pennsylvania 
Steel  Company  erected  a  plant  at  Harrisburg  expressly 
for  the  manufacture  of  Bessemer  steel.  In  1867  American 
mills  made  19,643  tons  of  steel  and  turned  out  2,275  tons 
of  steel  rails.  The  price  of  steel  rails  in  currency  was 
$166  a  ton,  more  than  twice  the  price  of  iron  rails,  but  not- 
withstanding the  high  cost  there  was  a  rapid  increase  in 
demand.  With  larger  production  the  cost  of  manufacture 
declined,  until  in  1871  the  price  dropped  to  $102.50  a 
ton. 

Milling.  The  growth  of  the  iron  and  steel  industry  and 
the  general  development  of  manufacturing  and  transporta- 
tion were  reflected  in  the  increased  production  of  iron 
ore,  coal  and  other  commercial  minerals.  In  1873  the 
amount  of  coal  mined  in  the  United  States  was  51,000,000 
tons,  nearly  four  times  the  quantity  mined  in  1860.  An 
industry  closely  related  to  the  iron  industry  was  the  pro- 
duction of  coke,  which  gradually  became  the  leading  fuel 
used  in  blast  furnaces.  Coke-ovens  were  built  in  large 
numbers  in  tlie  bituminous  coal-fields  of  western  Pennsyl- 


398  THE  CRISIS  OF  1873 

vania  to  produce  the  fuel  for  the  furnaces  in  which  the 
iron  ores  brought  from  the  ranges  near  Lake  Superior  were 
smelted.  In  the  early  days  of  coke  manufacture  no  effort 
was  made  to  save  the  gas,  ammonia,  tar  and  other  products 
which  were  derived  from  the  coal  in  the  coking  process. 
The  "by-product  coke-oven"  was  still  to  be  invented. 

The  oil  fields  of  Pennsylvania  proved  to  be  a  wonderful 
source  of  wealth.  By  1870  the  annual  production  of  petro- 
leum was  more  than  two  hundred  million  gallons.  Kero- 
sene became  the  leading  household  illuminant  in  America, 
and  petroleum  products  replaced  many  of  the  vegetable 
and  animal  oil  lubricants  used  in  former  years.  The  whal- 
ing industry  of  America  sank  to  insignificant  proportions 
and  the  great  fleet  of  whaling  vessels  dwindled  away. 
American  petroleum  interests  sent  agents  to  Europe  to 
demonstrate  the  advantages  of  kerosene,  and  oil  products 
soon  took  an  important  place  among  the  exports  of  the 
United  States. 

Reconstruction  in  the  South.  While  the  years  imme- 
diately following  the  Civil  War  witnessed  a  marked  ex- 
pansion of  all  branches  of  industry  in  the  North  and  West, 
the  South  for  the  most  part  presented  a  picture  of  economic 
and  political  distress.  The  abolition  of  negro  slavery  and 
the  sudden  enfranchisement  of  the  freedmen  created  a 
grave  problem.  The  negroes  had  for  generations  been 
driven  to  toil  and  they  had  acquired  none  of  the  incentives 
of  the  free  laborer.  To  most  of  them  the  sweetest  fruit  of 
freedom  was  idleness.  Labor  was  the  sign  of  bondage. 
Early  attempts  to  establish  the  wage  relation  between  the 
planters  and  the  freedmen  were  for  the  most  part  inef- 
fectual, for  after  receiving  a  week's  wages  a  negro  would 
work  no  more  until  the  money  was  spent.  Many  negroes 
disdained  work  and  roamed  about  the  country  enjoying 
freedom  from  old  restraints.  Idleness  and  hunger  led 
them  to  crime  and  disorder  rather  than  to  industry.     The 


THE  CRISIS  OF  1873  399 

reconstruction  policy  of  Congress  did  not  tend  to  hasten 
the  process  of  industrial  reorganization  in  the  South.  The 
Southern  white  leaders  were  deprived  of  all  political 
power  while  the  ignorant  freedmen  were  enfranchised  and 
given  complete  civil  rights.  Under  the  protection  of 
armed  forces  the  negroes  and  the  unscrupulous  "carpet- 
baggers" and  "scalawags"  dominated  the  Southern 
States.  The  relief  extended  to  the  destitute  negroes  by  the 
Freedmen 's  Bureau  not  infrequently  had  the  effect  of  en- 
couraging idleness  and  thriftlessness.  The  excesses  of  the 
negroes  aroused  a  spirit  of  retaliation  among  the  whites, 
which  found  expression  through  the  Ku  Klux  Klan  and 
other  secret  terrorist  organizations. 

The  appalling  destruction  of  property  and  the  loss  of 
life  during  the  four  years  of  war  would  have  made  the  re- 
organization of  the  South  a  highly  difficult  matter  under 
the  most  favoring  circumstances.  Under  the  conditions 
which  actually  existed  the  case  of  the  South  was  desperate. 
Without  a  supply  of  steady  labor  the  old  plantation  sys- 
tem of  agriculture  could  not  survive.  An  entirely  new 
system  had  to  be  devised.  The  large  holdings  were  divided 
into  small  tracts  and  offered  for  sale  or  lease.  The  more 
reliable  negroes  became  tenant  farmers.  Many  of  the 
poorer  whites  took  advantage  of  the  new  state  of  affairs  to 
become  independent  landowners.  Bitter  experience  had  a 
salutary  influence  upon  both  white  men  and  negroes,  and 
by  slow  degrees  the  system  of  tenant  farming  made 
progress  throughout  the  cotton  belt.  It  was  several  years 
however  before  the  production  of  the  great  Southern  sta- 
ple reached  the  proportions  attained  before  the  war.  The 
crop  of  1861,  amounting  to  4,490,586  bales,  had  been  the 
largest  ever  produced  in  the  South.  In  the  exceptionally 
good  year  of  1870  a  crop  of  4,024,527  bales  was  raised. 
There  was  a  drop  in  production  the  following  A^ear  and  not 
until  1877  was  the  record  of  1861  exceeded.     It  was  many 


400  THE  CRISIS  OF  1873 

years  later  when  the  production  of  rice  and  sugar  reached 
the  record  of  production  attained  before  the  war. 

Speculative  Tendencies.  Though  Northern  industry  ex- 
panded at  a  rate  which  gave  the  country  the  appearance  of 
abounding  prosperity,  the  expansion  was  unfortunately  at- 
tended by  much  speculation,  which  caused  a  great  inflation 
of  credit,  and  led,  as  usual,  to  a  disastrous  crisis.  Specu- 
lative activities  were  due  in  part  to  overconfidence  in  the 
productive  capacity  of  the  country.  Farmers  mortgaged 
their  lands  to  obtain  money  for  equipment  and  improve- 
ments, and  then  failed  to  earn  enough  to  meet  the  interest 
and  principal  of  their  debts.  Large  amounts  of  capital 
were  sunk  in  industrial  enterprises  which  failed  to  yield 
an  adequate  return.  ]\Iany  of  the  new  railroads,  especially 
many  of  those  built  in  the  West,  were  destined  to  wait 
several  years  for  the  development  of  traffic  sufficient  to 
make  them  paying  investments.  Unfortunately  much  of 
the  speculation  consisted  of  unwise,  and,  too  often,  even 
fraudulent  practices  on  the  part  of  professional  financiers 
and  speculators. 

Railroad  construction  and  consolidation  offered  a  fertile 
field  for  speculative  endeavor.  The  Western  railroads 
which  obtained  land  grants  and  loans  from  the  Federal 
Government  were  usually  built  in  a  reckless  and  wasteful 
manner.  The  chief  object  of  the  promoters  was  to  make 
as  much  money  as  possible  from  the  construction  of  rail- 
roads and  not  from  their  operation.  It  was  a  common 
practice  for  a  small  group  of  directors  of  a  railroad  com- 
pany to  organize  a  construction  company,  and  then  as 
directors  of  the  railroad  company  they  would  pay  them- 
selves, as  directors  of  the  construction  company,  fabulous 
prices  for  building  the  railroad.  In  this  way  the  stock- 
holders and  the  bondholders  of  the  railroad  company  were 
defrauded,  and  the  subsidies  received  from  the  Government 
were  dishonestly  appropriated  by  a  few  greedy  manipula- 


THE  CRISIS  OF  1873  401 

tors.  One  of  the  most  notorious  of  the  construction  com- 
panies of  the  time  was  the  Credit  Mobilier,  a  Pennsylvania 
corporation  organized  by  some  large  stockholders  of  the 
Union  Pacific  Railroad  Company.  The  head  of  the  con- 
struction company  was  a  member  of  Congress,  and  he  dis- 
tributed some  shares  of  stock  among  prominent  members 
of  the  Senate  and  the  House  of  Representatives,  presuma- 
bly with  the  purpose  of  influencing  votes  on  measures  af- 
fecting the  Union  Pacific  Railroad.  A  grave  political  scan- 
dal was  created  and  while  it  was  not  found  that  the  recipi- 
ents of  the  stock  were  guilty  of  corruption,  the  entire  affair 
reflected  much  discredit  upon  all  who  were  connected  with 
it.  The  fast  freight  lines  were  also  frequently  the  means 
of  diverting  the  earnings  of  the  railroad  companies  to  the 
pockets  of  a  few  directors,  who  organized  the  freight  lines 
and  made  favorable  contracts  with  themselves  for  the  trans- 
portation of  their  cars. 

Another  undesirable  feature  of  the  railroad  business  was 
the  excessive  capitalization  of  many  lines.  When  the  New 
York  Central  and  the  Hudson  River  lines  were  consolidated 
in  1869  Commodore  Vanderbilt  issued  new  stock  of  a  par 
value  double  the  par  value  of  the  total  stock  of  the  con- 
solidated companies.  The  Pennsylvania  increased  its  capi- 
talization by  issuing  stock  dividends,  and  when  it  assumed 
control  of  the  Pittsburgh,  Fort  Wayne  and  Chicago  road  in 
1869,  the  latter  company  was  permitted  to  make  a  large 
issue  of  new  stock  upon  which  the  Pennsylvania  guaran- 
teed permanent  dividends.  In  the  struggle  between  Jay 
Gould  and  Commodore  Vanderbilt  for  the  control  of  the 
Erie  the  capitalization  of  that  road  was  increased  nearly 
threefold.  Many  of  the  new  western  lines,  especially  those 
receiving  land  grants,  were  greatly  overcapitalized. 

As  long  as  the  earnings  of  the  railroads  remained  high 
railroad  securities  commanded  a  good  price  and  were 
readily  saleable  in  the  United  States  and  Europe.     Banks 


402  THE  CRISIS  OF  1873 

loaned  freely  on  many  of  the  railroad  stocks  and  bonds, 
and  speculators  pledged  them  with  the  banks  as  security 
for  funds  which  they  borrowed  to  carry  on  their  operations 
in  the  stock  market.  One  element  of  danger  lay  in  the 
fact  that  the  railroad  earnings  of  the  Civil  War  period  were 
abnormally  high.  If  earnings  should  decline  to  normal 
they  might  not  be  sufficient  to  support  the  greatly  increased 
capitalization,  and  a  collapse  of  security  values  might  ensue 
with  disastrous  results. 

The  speculation  in  railroad  securities  and  the  dishonest 
practices  in  connection  with  railroad  construction  and 
operation  were  not  the  only  discreditable  financial  activi- 
ties which  came  in  the  wake  of  the  Civil  War.  The  reac- 
tion which  followed  the  war  seemed  to  create  a  decidedly 
lower  moral  tone  in  business  and  in  politics.  No  period  in 
our  history  has  been  filled  with  so  many  disheartening 
scandals  as  the  ten  year  period  following  the  Civil  War. 
The  Credit  Mobilier  episode  occurred  almost  simultane- 
ously with  an  equally  reprehensible  affair  in  which  several 
hundred  thousand  dollars  were  spent  to  induce  Congress 
to  enact  a  ship  subsidy  law.  Congress  passed  the  notorious 
"salary  grab"  measure.  Great  frauds  were  uncovered  in 
connection  with  the  payment  of  internal  taxes  on  whiskey; 
the  head  of  one  of  the  executive  departments  of  the  Federal 
Government  was  found  to  be  guilty  of  accepting  bribes. 
The  infamous  Tweed  ring  brought  disgrace  upon  New 
York  City.  The  Erie  Railroad  speculation,  in  which 
Commodore  Vanderbilt,  Jay  Gould  and  Daniel  Drew  were 
involved,  was  accomplished  by  the  bribing  of  legislative 
and  judicial  officers  of  New  York. 

While  local  and  national  political  life  was  demoralized 
and  shamed  by  corrupt  practices  of  many  kinds  the  busi- 
ness community  was  demoralized  by  financial  scandals. 
One  of  the  most  offensive  acts  of  the  time  was  the  attempt 
of  a  group  of  speculators  headed  by  Jay  Gould  and  James 


THE  CRISIS  OF  1873  403 

Fisk  to  "corner"  the  gold  market  in  1869.     The  paper 
currency  of  the  country  still  circulated  at  a  discount  and 
the  only  monetary  use  of  gold  in  private  business  was  for 
the  settlement  of  international  trade  accounts.     The  Gov- 
ernment paid  the  principal  and  interest  of  the  national 
debt  in  gold  and  also  required  that  the  duties  on  imports 
be  paid  in  gold.     The  Treasury  bought  and  sold  gold  on 
the  gold  exchange  in  New  York  just   as  individual   ex- 
porters and  importers  bought  and  sold.     Gould  conceived 
the  idea  that  if  he  could  induce  the  Treasury  to  stay  out 
of  the  gold  market  for  a  time  he  could  corner  the  available 
supply  desired  for  commercial  purposes  and  make  a  huge 
profit  by  forcing  up  the  price  to  those  who  had  to  have  the 
metal  to  settle  their  foreign  obligations.     Gould  endeav- 
ored to  make  President  Grant  believe  that  it  would  be  a 
good  thing  for  the  country  if  the  Treasury  Department 
would  refrain  from  selling  gold  during  the  crop  moving  sea- 
son.    Grant   seemed   to   be    convinced   of   the   wisdom    of 
Gould's  arguments;  at  any  rate  early  in  September  orders 
were  given  to  the  Treasury  to  limit  its  sales  of  gold.     Here 
was  Gould's  opportunity.     In  cooperation  with  Fisk  and 
others,  he  proceeded  to  buy  all  the  gold  offered  on  the  ex- 
change,   and    when    later    in    September    merchants    and 
bankers  desired  to  obtain  gold  they  found  the  price  rapidly 
mounting.     Point  by  point  the  price  was  forced  up  until 
on  "Black  Friday  J'  September  24,  the  price  of  the  metal 
in  currency  reached  162.     Dozens  of  importers  who  needed 
gold  and  hundreds  of  speculators  who  had  sold  "short" 
were  ruined.     There  was  a  panic  in  Wall  Street.     Fisk 
boasted  that  he  would  send  the  price  of  gold  to  200.     But 
Gould,  having  become  fearful  that  the  Treasury  would  in- 
terfere and  break  the  market,  secretly  gave  orders  to  his 
brokers  to  sell.     His  fears  with  respect  to  the  Treasury 
were  confirmed,  for  the  Secretary  ordered  four  million  dol- 
lars sold  when  the  panic  reached  its  height.     Under  the 


404 


THE  CRISIS  OF  1873 


weight  of  this  sale  and  of  Gould's  offerings  the  price  col- 
lapsed and  quickly  receded  to  133,  causing  the  ruin  of 
many  speculators  who  had  helped  bid  up  the  price.  Fisk 
escaped  ruin  by  deliberately  repudiating  nearly  all  his  con- 
tracts, obtaining  protection  in  his  dishonest  conduct  from 
judges  whom  he  and  Gould  controlled.  A  Congressional 
committee  which  investigated  the  ''gold  conspiracy"  did 
little  more  than  describe  the  sordid  surface  details  of  the 
panic  and  report  that  ''for  many  weeks  the  business  of 


Prices  — — . 


Prices  and  Wages,  1840-1800 
(Aldrich  Report  of   1893.     1800=100) 

the  whole  country  was  paralyzed"  and  that  the  "founda- 
tions of  business  morality  were  rudely  shaken." 

Prices  and  Wages;  Progress  of  the  Labor  Movement. 
One  thing  which  rendered  the  excessive  inflation  of  credit 
dangerous  was  the  steady  fall  of  prices  after  the  war.  The 
peak  of  the  upward  movement  of  prices  was  reached  in 
1865,  and  after  the  coming  of  peace  there  was  a  rapid  and 
almost  continuous  drop  in  the  prices  of  nearly  all  commodi- 
ites.     The  chief  reason  for  the  decline  was  the  general  re- 


THE  CRISIS  OF  1873  405 

sumption  of  productive  industry  throughout  the  United 
States.  Thousands  upon  thousands  of  men  whom  the  war 
had  diverted  from  their  usual  pursuits  returned  to  farm 
and  factory.  The  blockade  of  the  South  was  lifted,  and 
though  Southern  industry  was  greatly  disorganized,  the 
relatively  small  production  of  cotton  could  not  but  have  the 
effect  of  reducing  prices  in  markets  from  which  for  four 
years  nearly  all  the  Southern  cotton  had  been  excluded. 
With  a  greatly  increased  use  of  labor  saving  machinery  the 
per  capita  production  of  the  country  speedily  advanced, 
and  with  the  increased  supply  of  goods  there  came  a  low- 
ering of  the  price  level. 

While  the  price  of  commodities  declined  there  was  no 
corresponding  decrease  in  the  level  of  wages.  It  invari- 
ably happens  that  in  time  of  transition  from  one  price  level 
to  another  the  movement  of  wages  lags  behind  the  move- 
ment of  commodity  prices,  advancing  more  slowly  and 
again  receding  more  slowly.  Throughout  the  war  wages 
advanced,  though  not  nearly  so  rapidly  as  the  cost  of  liv- 
ing. When  prices  began  to  fall,  wages  did  not  follow.  In 
fact  wages  rose  somewhat  even  after  the  downward  trend 
of  prices  began,  and  by  1867  the  relation  between  the  level 
of  prices  and  the  level  of  money  wages  was  virtually  what 
it  had  been  in  1860.  Thereafter  prices  continued  to  fall, 
but  wages  maintained  the  high  level  of  1867  until  after 
1873.  The  decline  in  prices  without  a  decrease  in  wages 
meant  that  in  many  industries  invested  capital  received  a 
lower  rate  of  return.  This  was  sure  to  have  a  depressing 
effect  upon  the  inflated  prices  of  many  securities. 

The  stability  of  wages  in  the  midst  of  falling  com- 
modity prices  was  due  to  the  growing  strength  of  labor  or- 
ganizations, to  the  abundance  of  free  land,  and  to  competi- 
tion among  employers  of  labor.  Employers  had  been  ob- 
taining exorbitant  profits  while  the  war  was  in  progress. 
When  with   increased  production  prices   fell,  they  could 


406  THE  CRISIS  OF  1873 

maintain  their  high  rate  of  profit  only  by  reducing  wages. 
The  free  lands  of  the  West  tended  to  restrict  the  supply  of 
wage  laborers,  and  employers  were  compelled  to  forego  the 
high  profits  to  which  they  had  become  accustomed. 

Labor  was  able  successfully  to  resist  attempts  to  reduce 
wages  not  only  because  of  the  free  land  in  the  West,  but 
also  because  during  the  war  many  laborers  had  perfected 
organizations  which  gave  them  greater  strength  in  bar- 
gaining with  employers.  The  rising  cost  of  living  during 
the  early  years  of  the  war  had  been  a  powerful  inducement 
to  laborers  to  cooperate  in  seeking  increased  pay  and  better 
working  conditions.  A  number  of  strong  trade-unions 
were  formed  while  the  war  was  going  on,  and  when  the  con- 
flict ended  the  process  of  organizing  labor  continued.  In 
1863  the  Brotherhood  of  Locomotive  Engineers  was  started, 
and  the  following  year  the  Cigar-Makers'  National  Union 
was  organized.  The  Bricklayers'  and  Masons'  International 
Union  was  launched  in  1865 ;  the  Order  of  Railway  Con- 
ductors in  1867;  the  United  States  Wool  Hat  Finishers' 
Association  and  the  Brotherhood  of  Locomotive  Firemen 
in  1869.  The  Noble  Order  of  the  Knights  of  Labor,  which 
represented  an  effort  to  organize  all  laborers  into  one  great 
body,  was  founded  in  1869.  It  later  became  an  exceedingly 
powerful  organization. 

In  1866  a  National  Labor  Union  Convention  was  held  at 
Baltimore,  attended  by  delegates  representing  labor  unions 
in  a  large  number  of  States.  The  convention  demanded  an 
eight  hour  day,  the  abolition  of  child  labor,  and  the  general 
improvement  of  working  conditions  for  all  men  and  women 
in  industry.  A  convention  was  held  in  1867  and  another 
in  1868,  and  a  workingmen's  party  organized  which  for  a 
time  exhibited  considerable  jwlitical  strength.  The  at- 
tempt of  the  unions  to  enter  politics  created  factional  quar- 
rels however  which  soon  brought  to  an  end  the  political 
phase  of  the  labor  movement,  but  it  did  not  check  the 


THE  CRISIS  OF  1873  407 

growth  of  trade-unionism.  By  1870  there  were  about 
forty  strong  labor  organizations  in  existence. 

The  Decline  of  Railroad  Earnings.  The  most  dangerous 
symptom  of  an  approaching  financial  crisis  was  the  decline 
in  the  earnings  of  the  railroad  corporations  after  1867. 
The  decline  was  due  in  part  to  the  fraudulent  practices  of 
dishonest  directors,  but  it  was  due  chiefly  to  a  sharp  fall 
in  freight  rates  brought  about  by  the  competition  of  rival 
railroad  systems.  In  1869  the  Pennsylvania  and  the  New 
York  Central  obtained  control  of  direct  routes  between 
the  seaboard  and  Chicago,  and  a  short  time  later  the  Bal- 
timore and  Ohio  and  the  Erie  likewise  gained  an  entrance 
to  Chicago.  Chicago  was  the  center  of  the  grain  and  pro- 
vision trade.  Wheat,  flour  and  provisions  were  becoming 
highly  important  exports,  and  each  railroac^  was  anxious 
to  obtain  the  lion's  share  of  the  freight  destined  for  foreign 
shipment.  The  livestock  traffic  and  the  oil  traffic  were  also 
prizes  for  which  the  rival  lines  contended.  In  the  competi- 
tive struggle  rates  were  cut  in  a  desperate  manner.  An 
example  of  the  character  of  the  competition  is  shown  in 
the  violent  decline  in  the  rates  on  traffic  from  Chicago  to 
New  York.  The  first  class  rate  between  these  two  cities 
had  been  above  two  dollars  a  hundred  pounds  during  the 
war  and  at  the  beginning  of  February  1869  it  was  $1.88 
a  hundred  pounds.  A  rate  war  started,  and  by  February 
24  the  first  class  rate  dropped  to  40  cents.  Throughout 
the  following  year  it  seldom  exceeded  50  cents. 

The  competition  of  the  Eastern  lines  was  duplicated 
among  the  rival  lines  of  the  West,  which  also  made  radical 
reductions  in  the  rates  on  competitive  traffic.  The  losses 
which  all  the  railroads  suffered  from  these  rate  wars  they 
endeavored  to  make  up  in  part  by  increasing  the  rates  of 
those  cities  and  districts  which  had  no  competing  railroads. 
This  policy  resulted  in  extremely  unfair  and  burdensome 
discriminations,  and  was  a  cause  of  much  hostility  to  the 


408  THE  CRISIS  OF  1873 

railroad  companies,  especially  among  the  farmers  of  the 
Western  States,  who  were  the  chief  sufferers.  The  large 
production  of  grain  had  caused  a  fall  in  prices  which  de- 
creased the  farmers'  earnings,  and  now  the  railroads  were 
endeavoring  to  absorb  what  little  remaining  profit  there 
was  in  the  farming  business. 

The  Granger  Movement.  The  farmers  were  not  slow  to 
defend  themselves  against  the  unfair  practices  of  the  rail- 
road companies.  In  1867  a  national  farmers'  organiza- 
tion known  as  the  ''Patrons  of  Husbandry"  had  been 
founded,  with  the  purpose  of  improving  the  conditions  of 
rural  life.  The  local,  State  and  National  bodies  of  the 
organization  were  known  as  ''Granges,"  and  the  entire  or- 
ganization movement  among  the  farmers  has  been  called  the 
"Granger  Movement."  A  large  number  of  granges  were 
established  throughout  the  Central  and  Western  States. 
Their  chief  activity  at  first  was  to  foster  a  system  of  co- 
operative marketing  among  the  members.  It  was  no  dif- 
ficult matter  for  them  to  use  their  influence  to  correct  the 
abuses  of  which  the  railroads  were  guilty.  State  legis- 
latures, under  pressure  of  the  farmers'  organizations,  en- 
acted laws  for  the  regulation  of  railroad  rates.  These 
"Granger  laws"  served  to  reduce  still  further  the  earnings 
of  the  fighting  and  struggling  railroads. 

Excessive  Imports.  Another  element  of  weakness  in 
the  economic  situation  was  the  excessive  importation  of 
foreign  goods.  Just  as  before  the  crisis  of  1837,  domestic 
speculation  and  false  visions  of  great  wealth  bred  a  spirit  of 
extravagance,  which  resulted  in  the  purchase  of  large  quan- 
tities of  luxuries  from  foreign  countries.  During  the  five 
years  following  1867  the  foreign  imports  brought  into  the 
United  States  exceeded  the  exports  of  domestic  merchan- 
dise and  specie  by  more  than  $230,000,000.  This  large  debt 
was  settled  in  part  by  the  heavy  foreign  purchases  of 
American  railroad  and  industrial  securities.     When  these 


THE  CRISIS  OF  1873  409 

securities  began  to  decline  in  value  foreign  holders  put 
them  on  the  market  demanding  specie  in  exchange. 

The  Panic  of  1873.  In  1873  the  bubble  of  inflated  credit 
burst  and  the  country  experienced  a  disastrous  financial 
panic.  The  crisis  came  in  September.  Throughout  the 
year  there  had  been  signs  of  an  ominous  nature.  The  ex- 
cess of  merchandise  imports  in  1872  had  been  more  than 
$100,000,000.  The  demand  for  specie  was  reflected  in  a 
sale  of  securities  on  domestic  stock  exchanges,  and  with 
these  sales  the  prices  of  many  stocks  and  bonds  began  to 
recede.  Banks  which  had  loaned  heavily  to  speculators, 
accepting  various  railroad  and  industrial  stocks  and  bonds 
as  security,  began  to  demand  more  collateral.  A  spirit  of 
uneasiness  pervaded  the  financial  centers,  and  individuals 
began  to  hoard  specie  and  currency.  An  abortive  attempt 
to  corner  the  gold  market  in  August  caused  a  sudden  flurry. 
The  rate  of  interest  on  loans  advanced  and  the  money 
market  gradually  *' tightened." 

The  signal  for  the  crash  came  when  the  banking  house  of 
Jay  Cooke  and  Company  in  Philadelphia  announced  its 
failure  on  September  18.  This  firm  had  invested  heavily 
in  the  bonds  of  the  Northern  Pacific  Railroad.  When  the 
Northern  Pacific,  in  common  with  many  other  Western 
railroads  built  far  in  advance  of  the  actual  need  for  them, 
failed  to  earn  enough  to  pay  the  interest  on  its  bonds,  the 
bonds  became  virtually  valueless,  and  Cooke  and  Company, 
whose  assets  consisted  largely  of  these  bonds,  could  not 
meet  their  obligations  to  their  depositors  and  other  credi- 
tors. The  great  mass  of  securities  outstanding  in  1873  had 
the  same  general  relation  to  the  business  situation  as  the 
large  volume  of  bank-notes  in  circulation  in  1837.  As  long 
as  there  was  confidence  that  the  paper  evidences  of  credit 
were  supported  by  substantial  values  they  were  readily  ac- 
ceptable. But  once  it  became  apparent  tliere  was  nothing 
behind  them  there  was  a  general  rush  to  liquidate. 


410  THE  CRISIS  OF  1873 

On  September  19  the  news  of  the  failure  of  Cooke  and 
Company  started  a  panic  in  Wall  Street.     Another  Black 
Friday  had  come,  even  worse  than  the  Black  Friday  of 
1869.     Securities  were   dumped   on   the   market   in   huge 
amounts  and  prices  tumbled  downward.     Several  broker- 
age and  banking  houses,  whose  assets  consisted  largely  of 
the    securities    of    overcapitalized    railroad    corporations, 
closed  their  doors.     There  was  a  mad  rush  for  money  among 
speculators  to  prevent  being  ' '  sold  out ' '  by  their  brokers  at 
the  ruinously  low  prices.     The  rate  of  interest  advanced 
to  one-half  of  one  per  cent  a  day.     A  run  on  the  banks 
started   and    only   by    pooling    their    resources   were    the 
national  banks  of  New  York  able  to  survive.     The  stock 
exchange  was  closed  for  ten  days.     The  Treasury  Depart- 
ment helped  matters  slightly  by  buying  bonds  and  thereby 
liberating  some  needed  currency.     The  demands  made  upon 
the  banks  by  their  depositors  forced  the  banks  to  call  in 
their  loans.     The  process  of  liquidation  thus  started  spread 
throughout  the  entire  country.     Prices  fell,  making  it  im- 
possible for  debtors  to  meet  their  obligations.     When  one 
group  of  debtors  failed  they  dragged  their  creditors  down 
with  them.     One  business  house  after  another  went  into 
bankruptcy  until  in  a  single  year  more  than  5,000  failed, 
with  losses  of  nearly  $250,000,000.     Productive  industry 
was   crippled.     Factories   closed   down   and   thousands   of 
workmen  were  thrown  out  of  employment.     Mortgages  were 
foreclosed  and  farmers  lost  their  homes.     Railroad  traffic 
dwindled  away  and  several  railroads  went  into  the  hands 
of  receivers.     A  period  of  industrial  and  financial  stagna- 
tion set  in  which  lasted  for  half  a  decade. 

Questions  and  Topics 

1,  Do  you  think  it  would  have  been  better  for  the  Gov- 
ernment to  build  and  own  railroads  rather  than  grant  land 
to  the  private  companies  who  built  them  ?     Give  reasons. 


THE  CRISIS  OF  1873  411 

2.  Name  what  you  consider  to  be  the  three  greatest  in- 
ventions or  discoveries  for  each  century  from  the  discovery 
of  America  to  present  time. 

3.  Describe  a  visit  to  a  mine,  a  steel  mill  or  some  manu- 
facturing plant. 

4.  Compare  the  negro  problem  of  to-day  with  that  of  the 
period  directly  after  the  war. 

5.  Can  you  name  any  industries  not  represented  by  trade 
unions  ? 

6.  With  the  various  panics  experienced  by  the  United 
States  in  mind,  list  what  you  consider  to  be  the  principal 
causes  of  panics. 


PART  VI 

LARGE  SCALE  PRODUCTION  AND 
COMPETITION 


CHAPTER  XXI 
LARGE  SCALE  PRODUCTION 

Economic  Development  Since  1873.  The  record  of 
material  achievement  in  the  United  States  before  1873 
was  remarkable,  but  it  has  been  eclipsed  in  most  respects 
by  the  amazing  record  of  growth  since  that  year.  Eco- 
nomic progress  is  cumulative;  it  is  subject,  as  it  were,  to 
the  "law  of  acceleration,"  Each  generation  accomplishes 
greater  things  than  the  preceding  generation  because  it 
can  build  upon  the  achievement  of  all  previous  generations. 
The  great  inventions  perfected  before  1873,  the  accumula- 
tion of  capital,  and  the  increased  knowledge  of  industrial 
processes  made  it  possible  for  virtually  all  the  great  indus- 
tries in  the  United  States  after  1873  to  enter  upon  the  stage 
which  we  term  "large  scale  production." 

For  a  time  after  the  stage  of  large  scale  production  was 
reached,  industry  was  in  the  main  vigorously  competitive. 
Excessive  competition  caused  a  sharp  reduction  of  business 
profits,  and  this  loss  of  profits  resulted  in  a  widespread 
movement  toward  industrial  combination,  the  chief  purpose 
of  which  was  to  control  production  and  prices  through  the 
exercise  of  monopoly  power.  The  unfair  practices  to  which 
numerous  monopolistic  combinations  resorted  for  the 
sake  of  enhanced  profits  led  in  turn  to  a  movement  for 
the  regulation  of  private  business  by  the  government. 
Large  scale  production  and  competition — combination  and 
monopoly — government  regulation  of  business — these  have 
been  the  most  significant  features  of  economic  history 
since  1873.     The  period  from  1874  to  1894  was  in  general 

415 


416  LARGE  SCALE  PRODUCTION 

a  period  of  rigorous  competition,  though  the  movement  to- 
ward industrial  combination  had  a  substantial  growth  dur- 
ing these  years,  and  a  beginning  was  made  in  the  regula- 
tion of  business  by  the  Federal  Government.  The  years 
between  1894  and  1903  witnessed  the  full  development  of 
industrial  combinations.  Since  1903  there  has  been  a 
marked  development  of  the  regulation  of  private  business 
by  Federal  authority. 

Large  Scale  Production  in  Agriculture.  A  greatly  in- 
creased production  of  cereals,  cotton,  hay,  live  stock  and 
other  farm  products  was  one  of  the  most  notable  features 
of  the  economic  progress  of  the  United  States  during  the 
two  decades  following  1873.  Thousands  of  settlers  took 
up  lands  in  the  South  and  in  the  West,  and  each  year 
saw  the  United  States  taking  a  greater  part  in  producing 
commodities  to  feed  and  clothe  the  world.  Large  scale  pro- 
duction in  agriculture  did  not  consist  so  much  in  the  opera- 
tion of  exceedingly  large  farms  as  in  the  application  of 
machinery  to  planting,  cultivating  and  harvesting,  the  use 
of  mechanical  devices  in  handling  and  transporting  the 
products  of  the  farms  and  in  converting  them  into  com- 
modities for  human  consumption,  and  the  adoption  of  fac- 
tory methods  in  a  number  of  farm  activities.  The  average 
^ize  of  farms  in  the  United  States  tended  to  decline  after 
1870.  though  there  was  a  marked  increase  in  the  percentage 
of  improved  land  in  single  farms.  But,  notwithstanding 
the  smaller  average  holdings  of  rural  landowners,  the  use  of 
steam  power  and  of  improved  machinery  greatly  increased 
per  capita  production  in  all  branches  of  agriculture. 

In  the  Northern  states  the  chief  commercial  crop  was 
wheat.  The  production  of  this  important  cereal  advanced 
from  281,254,700  bushels  in  1873  to  611,780,000  bushels  in 
1891.  In  only  two  intervening  years  did  production  fall 
below  300,000,000  bushels,  and  the  average  annual  produc- 
tion was  well  above  400,000,000  bushels.     ^lany  farmers  of 


LARGE  SCALE  PRODUCTION  417 

the  Northwest  cultivated  great  "bonanza  farms"  contain- 
ing tliousantls  of  acres,  all  devoted  to  the  production  of 
wheat.  In  1880,  J.  F,  Appleby  perfected  the  automatic 
knot-tying  or  self-binding  reaper,  which  made  it  possible  to 
dispense  with  the  labor  of  binding  sheaves  by  hand.  In 
most  sections  of  the  United  States  the  occurrence  of  rain 
during  the  harvest  season  makes  it  necessary  that  wheat 
and  similar  grains  be  cut  and  placed  in  shocks  to  dry  for 
threshing.  In  some  sections,  however,  particularly  in  the 
valley  of  the  Columbia  River  and  in  the  Dakotas,  the  har- 
vest season  is  sufficiently  devoid  of  rain  to  permit  the  grain 
to  dry  before  cutting.  In  such  places  the  grain  is  often 
cut  with  ' '  headers. ' '  About  1885  a  combined  harvester  and 
thresher  was  perfected.  This  machine,  drawn  by  a  steam 
traction  engine  or  by  30  to  40  horses,  cut  the  heads  of  wheat 
from  the  stalks  and  threshed,  cleaned  and  bagged  the 
grain.  On  many  of  the  bonanza  farms  gang  plows  drawn 
by  steam  tractor  engines  and  capable  of  turning  a  half- 
dozen  furrows  at  once  were  used  to  break  up  the  soil  for 
planting. 

The  introduction  of  the  "roller  process"  of  making  flour 
in  1878  had  a  highly  stimulating  effect  upon  wheat  farming. 
Most  of  the  wheat  raised  in  the  United  States  is  "winter 
wheat,"  which  is  planted  in  the  fall.  In  many  parts  of  the 
United  States  lying  near  the  Canadian  boundary  the  win- 
ters are  as  a  rule  too  cold  for  winter  wheat,  and  another 
variety  known  as  "spring  wheat"  is  planted.  Under  the 
old  method  of  flour  manufacture,  in  which  the  grain  was 
ground  by  buhrstones  set  close  together,  too  much  of  the 
hard  outer  covering  of  the  spring  wheat  kernels  would  re- 
main in  the  flour,  giving  it  a  dark  color  and  making  it  more 
susceptible  to  spoiling  by  dampness  than  flour  from  which 
all  the  bran  was  removed.  By  the  use  of  the  new  process 
a  finer  grade  of  white  flour  could  be  made  from  spring 
wheat   than    from   winter   wheat.     The   spring   wheat   of 


418  LARGE  SCALE  PRODUCTION 

Wisconsin,  Minnesota  and  the  Dakotas  took  on  an  added 
value  after  the  introduction  of  the  roller  process. 

The  great  increase  in  the  production  of  wheat  and  other 
cereals  rendered  necessary  the  development  of  equipment 
with  which  grain  could  be  handled  and  transported  in  large 
quantities   cheaply   and    rapidly.     Throughout   the    grain 
raising  districts  elevators  were  erected  in  which  grain  was 
handled  in  bulk  by  steam  driven  machinery.     Usually  the 
grain  was  hauled  to  the  elevators  in  bags,  but  in  many  dis- 
tricts this  practice  was  dispensed  with  and  the  grain  hauled 
in  bulk  direct  from  thresher  to  elevator.     A  system  of  grad- 
ing and  inspection  was  established,  and  prices  of  wheat 
varied  with  the  grade.     The  different  grades  of  grain  were 
kept  in  separate  bins,  but  it  was  not  necessary  to  provide  a 
special  bin   for  the   grain   purchased  from  each   farmer. 
From    the   country   elevators   the   grain   was   shipped   in 
bulk  carloads  to  the  storage  elevators  at  the  primary  grain 
markets  of  the  Central  States;  from  these  terminal  eleva- 
tors it  was  distributed  to  millers  or  shipped  to  the  seaboard 
for  export.     The  mechanical   equipment  of  the  terminal 
elevators  made  it  possible  to  unload  grain  from  cars  and 
load  it  into  cars  or  ships  at  a  rate  of  6,000  to  10,000  bushels 
an  hour.     Chicago  became  the  greatest  primary  grain  mar- 
ket in  the  world.     In  1890  the  receipts  of  grain  at  Chicago 
amounted  to  219,052,518  bushels,  and  the  shipments  were 
204,679,918  bushels.     Minneapolis,  with  a  splendid  water 
power  site,  took  the  lead  in  the  manufacture  of  flour. 

Throughout  this  period  the  rate  of  increase  in  the  produc- 
tion of  wheat  in  the  United  States  was  greater  than  the  rate 
of  growth  of  the  population,  and  consequently  a  large  sur- 
plus of  wheat  and  flour  was  available  for  export.  More 
than  one-fourth  of  the  wheat  raised  between  1870  and  1890 
was  sold  abroad,  and  of  that  raised  between  1890  and  1895 
one-third  was  consumed  in  foreign  countries.  Occasion- 
ally the  exports  of  grain  and  flour  exceeded  in  value  the  ex- 


LARGE  SCALE  PRODUCTION  419 

ports  of  cotton.  Great  Britain  was  the  leading  foreign 
market  for  American  grain;  Italy,  Belgium  and  the  West 
Indies  were  also  important  customers.  The  shipments  of 
flour  to  Europe  were  usually  considerably  less  in  value 
than  the  shipments  of  wheat,  because  European  nations 
gave  tariff  protection  to  their  own  milling  industries. 

The  production  of  corn  in  the  United  States  increased  as 
rapidly  as  the  production  of  wheat.  In  1889  the  corn  crop 
reached  the  large  total  of  2,112,892,000  bushels.  Though 
of  greater  value  than  the  wheat  crop,  the  annual  corn  har- 
vest was  of  less  importance  in  the  grain  trade  since  the 
larger  part  of  the  corn  was  used  to  feed  live  stock  on  the 
farms.  The  number  of  swine  and  cattle  in  the  United 
States  doubled  between  1870  and  1890,  the  increase  being 
greater  than  in  any  other  twenty  year  period.  Meat  pack- 
ing took  a  leading  place  among  American  manufacturing 
industries. 

In  1869  the  refrigerator  car  was  invented,  a  device 
which  made  it  possible  to  ship  fresh  beef  and  pork  from 
meat  packing  centers  of  the  Central  States  to  markets  all 
over  the  country.  The  shipment  of  live  cattle  to  Eastern 
cities  steadily  declined,  giving  way  to  a  large  traffic  in 
fresh  meat.  Refrigeration  in  transit  and  cold-storage  ware- 
houses transformed  meat-packing  from  an  almost  ex- 
clusively winter  industry  into  an  all-year  industry.  The 
installation  of  refrigeration  plants  in  ocean  steamships 
prepared  the  way  for  a  large  export  trade  in  fresh  meat. 

Closely  related  to  the  cereal  and  live  stock  business  was 
the  dairy  industry.  The  invention  of  the  centrifugal  cream 
separator  in  1880  by  C.  G.  De  Laval  of  Sweden  marked 
another  advance  in  the  substitution  of  machinery  for  man- 
ual labor  in  the  work  of  the  farm.  The  development  of 
machine  processes  in  the  dairy  business  made  it  possible 
to  undertake  the  manufacture  of  butter  and  cheese  in  fac- 
tories.    Cream  separators,  churns  and  butter  mixers,  oper- 


420 


LARGE  SCALE  PRODUCTION 


ated  by  steam  power,  furnished  an  excellent  illustration  of 
the  application  of  the  principles  of  large  scale  production. 
Refrigerator  cars  and  cold-storage  warehouses  had  a  pow- 
erful influence  upon  the  growth  of  trade  in  dairy  products. 
Dressed  poultry  and  eggs  assumed  an  added  commercial 
importance  because  of  the  improvement  of  the  process  of 
refrigeration. 

In  the  South  cotton  continued  to  be  the  crop  of  greatest 

importance,  though  one  of  the 
evidences  of  the  advantages  of 
free  labor  to  the  South  was  a 
steady  progress  in  the  diversi- 
fication of  agriculture,  and  in 
the  diversification  of  industry 
in  general.  Once  the  system 
of  tenant  farming,  which  suc- 
ceeded the  plantation  system 
in  the  cotton  belt,  was  well 
established,  it  proved  its  merit. 
The  cotton  crop  of  1877, 
amounting  to  4,494,224  bales  of 
500  pounds  each,  was  the  larg- 
est raised  in  a  single  year  up 
to  that  time.  For  the  next 
sixteen  years  the  average  an- 
nual crop  was  in  excess  of 
6,000,000  bales,  and  in  1894  there  was  a  "bumper  crop"  of 
10,025,534  bales. 

Tenant  farming  had  some  results  which  were  undesirable. 
The  negroes  who  leased  small  tracts  of  land  were  without 
capital  to  purchase  live  stock,  seed  and  tools.  The  country 
merchants  advanced  the  money  necessary  to  enable  the  ne- 
groes to  operate  their  small  farms,  taking  a  lien  on  the 
expected  crops  of  cotton.  The  bargain  between  merchant 
and  negro  usually  provided  that  the  negro  should  sell  his 


Cream  Separator 

Courtesy  of  the  De  Leval  Separator 
Comjiamj. 


LARGE  SCALE  PRODUCTION  421 

cotton  to  the  merchant  and  also  buy  from  him  all  supplies 
of  food,  clothing  and  equipment.  By  charging  excessive 
prices  and  exacting  high  rates  of  interest  the  merchants 
were  able  to  keep  the  less  responsible  negroes  constantly  in 
debt.  There  was  a  disposition  among  the  white  people  of 
the  South  to  justify  the  conditions  of  peonage  which  this 
system  of  agricultural  credit  created,  because  most  of  the 
negroes,  too  improvident  to  save  for  the  purpose  of  accumu- 
lation and  unwilling  to  work  when  in  possession  of  a  tem- 
porary surplus,  could  be  kept  at  work  only  by  being  sub- 
jected to  constant  pressure.  A  chronic  state  of  debt  sup- 
plied the  means  by  which  pressure  could  be  exerted.  When 
the  negroes  advanced  sufficiently  in  their  economic  educa- 
tion to  realize  the  necessity  of  thrift  and  accumulation, 
they  could  escape  from  the  serfdom  which  the  credit  sys- 
tem imposed  upon  them.  The  increasing  number  of  negroes 
who  bought  land  and  became  economically  independent 
was  proof  that  many  of  them  were  learning  the  responsi- 
bilities and  privileges  of  freedom. 

Labor  saving  machinery  helped  the  cotton  growers  in- 
crease the  acreage  of  cotton  and  added  to  the  yield  per 
acre.  Cottonseed  planters,  fertilizer  drills  and  improved 
plows  and  harrows  lightened  the  burden  of  manual  labor. 
The  uneven  ripening  of  the  cotton  bolls  on  single  plants 
made  the  invention  of  a  practical  cotton  picking-machine 
impossible.  Steam  ginneries  applied  factory  methods  to 
the  separation  of  the  cotton  seeds  from  the  fiber,  and  im- 
proved means  of  compressing  the  bales  of  cotton  facilitated 
the  handling  and  transportation  of  the  staple  of  the  South. 
Perhaps  the  most  remarkable  feature  of  the  cotton  industry 
was  the  utilization  of  the  seeds,  which  for  a  century  had 
been  discarded  as  a  viseless  waste  product.  The  seeds  were 
rich  in  oil  and  protein.  The  oil  was  used  to  make  oleo- 
margarine, salad  oils  and  soap,  while  the  cake  remaining 
after  the  oil  was  pressed  out  was  converted  into  meal  for 


422  LARGE  SCALE  PRODUCTION 

cattle  feed.     The  successful  use  of  by-products  added  many 
millions  of  dollars  to  the  value  of  the  annual  cotton  crop. 

Cotton  continued  to  hold  first  place  among  the  export 
products  of  the  United  States  except  for  a  short  time  fol- 
lowing 1875  when  it  was  passed  by  cereals  and  flour. 
Though  the  cotton  mills  of  the  United  States  consumed 
larger  and  larger  amounts  of  cotton  each  year,  production 
increased  at  a  more  rapid  rate  than  cotton  manufacturing 
expanded,  with  the  result  that  the  exports  of  cotton  grew 
constantly  in  volume.  Approximately  two-thirds  of  the 
cotton  raised  between  1873  and  1894  was  sold  abroad. 
Great  Britain  was  by  far  the  leading  customer  for  Ameri- 
can cotton ;  and  many  cotton  manufacturers  in  continental 
European  countries  also  looked  to  the  United  States  as 
their  chief  source  of  raw  materials. 

Manufacturing.  In  no  branch  of  industrial  activity 
were  the  advantages  of  large  scale  production  more  pro- 
nounced than  in  manufacturing.  After  the  worst  effects 
of  the  panic  of  1873  had  passed  away  the  manufacturing  in- 
dustries of  the  United  States  expanded  at  a  rapid  rate. 
The  value  of  the  manufactures  produced  in  the  census  year 
of  1880  was  $5,369,579,191.  Ten  years  later,  notwith- 
standing a  steady  decline  of  prices,  the  value  of  the  prod- 
ucts of  American  manufacturing  industries  was  $9,372,- 
378,843.  This  expansion  of  production  was  not  brought 
about  so  much  by  the  multiplication  of  manufacturing 
plants  as  by  the  increase  in  the  size  of  manufacturing  es- 
tablishments. In  the  meat-packing  and  steel  industries 
there  was  little  or  no  increase  in  the  number  of  establish- 
ments, and  in  cotton  manufacturing,  the  leading  textile 
industry,  there  was  a  decline  in  the  number  of  plants. 
But  in  all  of  these  industries  there  was  a  remarkable  in- 
crease in  the  amount  of  capital  invested,  the  number  of 
laborers  employed  and  the  volume  of  commodities  produced. 
The  large  establishment  made  possible  a  greater  division  of 


LARGE  SCALE  PRODUCTION  423 

labor  and  permitted  the  constant  use  of  expensive 
machinery.  Up  to  a  certain  point  virtually  all  manufac- 
turing industries  operate  under  the  law  of  increasing  re- 
turns— the  greater  the  amount  of  goods  produced  in  a 
single  plant,  the  less  the  cost  of  each  unit  of  finished 
product.  In  large  mills  the  fullest  advantage  can  be  taken 
of  the  use  of  machinery  and  of  highly  specialized  labor. 
The  utilization  of  by-products  is  another  important  econ- 
omy of  the  large  manufacturing  establishments.  Many  of 
the  "waste  products"  of  small  industrial  units  must  be 
discarded  because  the  quantity  is  too  small  to  justify  the 
expense  of  providing  the  machinery  and  labor  necessary 
to  work  them  up  into  usable  articles.  In  large  establish- 
ments these  products  are  available  in  such  amounts  that 
they  can  be  economically  subjected  to  manufacturing 
processes.  For  example,  in  the  slaughter-houses  of  small 
towns  the  bones,  horns,  hoofs,  and  entrails  of  slaughtered 
animals  are  often  thrown  away;  in  the  large  meat-packing 
plants  these  waste  products  are  converted  into  soap,  glue, 
fertilizer  and  other  useful  commodities. 

Machines  of  greater  power  and  complexity  made  manu- 
facturing processes  more  rapid  and  more  accurate,  increas- 
ing the  capacity  of  single  mills  and  turning  out  better  and 
cheaper  articles.  Steam  driven  machines  rolled,  hammered 
and  cut  great  ingots  of  steel  into  various  shapes  with  as 
much  facility  as  the  woodcarvers  and  shoemakers  of  former 
days  had  fashioned  wood  and  leather.  The  amount  of 
steel  made  in  the  United  States  increased  from  68,750  tons 
in  1870  to  4,277,071  tons  in  1890.  By  far  the  largest  part 
of  the  steel  produced  was  made  by  the  Bessemer  process. 
The  open-hearth  process  was  adopted  in  many  mills,  how- 
ever, and  though  it  was  slightly  more  expensive  than  the 
Bessemer  process,  the  superior  quality  of  the  metal  pro- 
duced caused  it  to  grow  steadily  in  favor.  In  the  produc- 
tion of  finished  articles  of  iron  and  steel  the  manufacturers 


424 


LARGE  SCALE  PRODUCTION 


of  the  United  States  made  steady  progress.  The  ma- 
chinery used  in  American  factories  and  on  American  farms 
was  made  largely  of  iron  and  steel.     The  immense  mileage 


A  Modern  Liiiotj'pe 

On  the  Model  24  Linotype,  which  is  substantially  a  Model  9  four- 
magazine  Linotype  with  tlie  addition  of  a  display  unit  carrying  four 
unusually  wide  auxiliary  magazines,  it  is  possible  for  the  operator 
to  set  (without  leaving  his  seat,  and  in  the  same  line  if  so  desired) 
virtually  any  combination  of  type  faces  from  5-point  to  extended 
36-point,  caps  and  lower-case. 
Courtesy  of  the  Mergenthal  Linotype  Company. 

of  railroad  constructed  between  1880  and  1890  (see  p.  431) 
was  equipped  with  steel  rails,  virtually  all  of  which  were 
rolled  in  American  rolling  mills.  Among  the  important 
new  products  of  the  iron  and  steel  industry  were  barbed- 


LARGE  SCALE  PRODUCTION  425 

wire,  a  machine  for  making  which  was  invented  in  1875, 
and  wire  nails,  the  production  of  which  began  on  an  ex- 
tensive scale  about  1887, 

In  the  textile  industries  better  looms,  knitting  machines 
and  printing  processes  improved  the  quality  and  added  to 
the  variety  of  American  cotton,  woolen  and  silken  fabrics. 
The  manufacture  of  clothing  of  all  kinds  was  cheapened 
by  the  use  of  machines  for  making  button-holes  and  for 
sewing  on  buttons.  These  devices  saved  countless  thou- 
sands of  hours  of  labor.  The  Goodyear  welt  machine  and 
the  chain-stitch  shoe-sewing  machine  wrought  important 
changes  in  the  boot  and  shoe  industry.  The  printing  and 
publishing  business  was  revolutionized  by  the  invention  of 
the  ]\Iergenthaler  type-bar  casting  machine. 

The  New  England  and  IMiddle  Atlantic  States  continued 
to  hold  the  lead  in  manufacturing,  with  the  Central  States 
following  closely.  In  the  West  the  smelting  of  copper, 
lead  and  other  metals,  flour  milling,  the  canning  of  fruit, 
fish  and  vegetables,  and  the  manufacture  of  wine  were  the 
most  important  manufacturing  industries.  In  the  South 
there  was  a  notable  advance  of  manufacturing.  Negro 
slavery  had  committed  the  South  almost  exclusively  to  agri- 
culture; with  free  labor  there  came  a  diversification  of  in- 
dustry. The  iron,  coal  and  limestone  deposits  of  Tennessee 
and  Alabama  furnished  raw  materials  for  a  thriving  iron 
and  steel  industry,  the  center  of  which  was  the  city  of 
Birmingham.  Cotton  mills  were  erected  in  numerous 
places  throughout  the  South.  In  1870  Southern  cotton 
mills,  with  328,000  spindles,  consumed  69,000  bales  of  cot- 
ton;  twenty  years  later  1,590,000  spindles  converted  539,- 
000  bales  of  cotton  into  yarn  in  Southern  factories.  The 
South,  freed  of  the  incubus  which  had  retarded  industrial 
development  so  long,  entered  the  stage  of  economic  develop- 
ment through  which  the  North  had  passed  during  the  first 
quarter  of  the  nineteenth  century. 


426  LARGE  SCALE  PRODUCTION 

The  Tariff.  The  continuation  of  the  high  tariff  policy 
adopted  during  the  Civil  War  served  to  stimulate  the  de- 
velopment of  manufacturing  in  the  United  States.  A 
large  surplus  in  the  Federal  Treasury  brought  about  a 
horizontal  reduction  of  ten  per  cent  in  all  tariff  duties  in 
1872,  but  the  war  duties  were  restored  the  following  year 
when  a  sharp  decline  in  imports  during  the  panic  was  fol- 
lowed by  a  Treasury  deficit.  The  restoration  of  prosperity 
was  accompanied  by  an  increase  in  foreign  trade,  and  by 
1882  the  Treasury  was  again  encumbered  with  a  large  sur- 
plus revenue.  A  Tariff  Commission,  appointed  in  1882, 
advised  a  radical  reduction  of  tariff  duties,  but  the  friends 
of  protection  in  Congress  would  not  permit  any  substantial 
change  in  the  tariff  laws.  In  December,  1887,  President 
Cleveland  urged  upon  Congress  a  thorough  revision  of  the 
tariff,  asserting  that  the  scale  of  duties  then  in  force  made 
the  cost  of  living  higher  than  it  should  be  and  enabled 
a  small  privileged  class  to  exact  enormous  profits  at  the 
expense  of  the  consuming  public.  In  1888  President  Cleve- 
land was  defeated  for  reelection,  though  he  received  a 
larger  popular  vote  than  his  successful  opponent.  The 
Republican  Congress,  interpreting  the  results  of  the  elec- 
tion as  a  mark  of  disapproval  of  Cleveland's  stand  on  the 
tariff,  enacted  the  McKinley  Tariff  Law  in  1890,  grant- 
ing to  American  manufacturers  a  greater  measure  of  pro- 
tection than  they  had  ever  before  enjoyed.  The  surplus 
in  the  Treasury  was  dissipated  by  the  enactment  of  pen- 
sion laws  requiring  the  payment  of  millions  of  dollars 
to  veterans  of  the  Civil  War.  The  McKinley  Law  met 
with  much  popular  disapproval  and  in  the  November  elec- 
tions of  1890  the  high  tariff  party  met  with  overwhelm- 
ing defeat.  There  were  too  few  changes  in  the  Senate, 
however,  to  make  an  immediate  modification  of  the  tariff 
law  possible,  and  the  McKinley  Act  remained  in  force 
until  late  in  1894. 


LARGE  SCALE  PRODUCTION  427 

The  high  tariff  gave  a  virtual  monopoly  of  the  domestic 
market  to  such  protected  industries  as  were  sufficiently  de- 
veloped to  meet  the  needs  of  consumers.  The  advanta- 
geous position  of  domestic  manufactures  was  reflected  in 
the  relative  decline  in  the  importation  of  finished  manu- 
factured products  from  foreign  countries.  Wiiereas  in 
1870  ''manufactures  ready  for  consumption"  constituted 
39.82  per  cent  of  the  merchandise  imports  of  the  United 
States,  in  1892  they  made  up  only  27.75  per  cent  of  the 
imports.  While  the  imports  of  manufactured  goods  was 
undergoing  this  decline,  the  proportion  of  crude  raw  ma- 
terials in  the  merchandise  imports  of  the  country  ad- 
vanced from  12.76  per  cent  to  22.76  per  cent,  and  the 
proportion  of  "manufactures  for  further  use  in  manu- 
facturing''' from  12.75  per  cent  to  15.44  per  cent.  These 
changes  in  the  character  of  the  import  trade  indicated 
clearly  that  American  manufacturers  were  supplanting 
their  foreign  rivals  in  the  domestic  market. 

The  Application  of  Electricity  in  Industry.  The  decade 
following  1880  witnessed  the  beginning  of  what  has  prob- 
ably been  the  most  significant  development  in  industry  since 
the  Civil  "War,  namely  the  use  of  electrical  energy  for  il- 
lumination and  as  a  source  of  motive  power  in  industry. 
The  earliest  important  commercial  uses  of  electric  current 
were  in  the  electro-plating  industry  and  in  the  telegraph. 
The  next  development  came  with  the  invention  of  the  tele- 
phone by  Alexander  Graham  Bell  in  1876.  In  the  same 
year,  at  the  Centennial  Exposition  held  in  Philadelphia, 
a  few  experimental  electric  arc  lamps  were  exhibited. 
These  lamps  had  mechanical  defects  which  prevented  their 
adoption  for  commercial  use,  but  they  foretold  the  coming 
of  a  new  era  in  artificial  lighting.  In  1879  Charles  Francis 
Brush  made  an  electric  arc  lamp  which  worked  satisfac- 
torily, and  the  following  year  Thomas  A.  Edison  perfected 
the  carbon  filament   incandescent   electric  lamp.     Within 


428  LARGE  SCALE  PRODUCTION 

ten  years  after  these  inventions  were  announced  there  were 
140,000  electric  arc  lights  and  650,000  incandescent  lamps 
illuminating  streets  and  buildings  in  various  cities  of  the 
United  States. 

Of  equal  importance  with  the  employment  of  electric 
energy  for  lighting  was  its  use  as  motive  power.  A  number 
of  remarkable  inventions,  which  greatly  enlarged  the  pos- 
sibilities of  the  use  of  electricity  in  industry,  were  given 


Alexander  Graham  Bell 
Copyright,  James  T.  White  d-  Co. 

to  the  world  during  the  seven  years  preceding  1890. 
Among  these  inventions  were  the  transformer,  the  rotary 
converter  and  the  split-phase  induction  motor.  Improved 
types  of  generators  and  direct  current  motors  were  devised 
which  opened  the  way  for  the  use  of  electric  power. 
Electric  energy  has  many  advantages  over  direct  steam 
power  in  the  propulsion  of  machinery.  The  transmission 
of  the  mechanical  energy  of  the  steam  engine  by  belts  and 


LARGE  SCALE  PRODUCTION  429 

shafting  involves  much  loss  of  power,  and  the  distance 
which  the  power  may  be  carried  is  necessarily  limited. 
Electric  energy  can  be  transmitted  over  long  distances 
with  relatively  little  waste,  it  is  easily  controlled,  and  it 
can  be  used  in  very  small  or  in  very  large  units  as  desired. 
The  effectiveness  of  the  electric  motor  as  an  aid  in  produc- 
tion was  quickly  perceived  by  many  American  business 


Thomas  A.  Edison 

men,  and  there  was  a  steady  growth  of  its  use  in  manu- 
facturing establishments.  One  of  the  most  notable  of  the 
early  applications  of  the  electric  motor  came  in  1888  when 
Frank  J.  Sprague  installed  the  first  electric  trolley  car 
sj^stem  on  the  Union  Passenger  Railway  of  Richmond, 
Virginia.  Within  a  few  years  electric  cars  were  in  use  on 
the  street  railways  of  dozens  of  American  cities. 

The  use  of  electric  power  necessitated  the  development 


430 


LARGE  SCALE  PRODUCTION 


of  manufacturing  industries  to  supply  motors,  generatoTs, 
converters,  storage  batteries,  copper  wire,  lighting  fixtures, 
telephone  equipment  and  many  other  kinds  of  electrical 
appliances.  The  manufacture  of  these  articles  soon  took 
high  rank  among  American  industries.  Experimentation 
and  investigation  constantly  widened  the  field  for  the  use 
of  electricity.  The  electric  reduction  furnace,  capable  of 
generating  heat  intense  enough  to  reduce  the  most  re- 
fractory ores,  was  invented  in  1885,  and  a  few  years  later 


The  First  Pierce-Arrow  Motor  Car 

came  the  discovery  of  the  process  of  electric  welding. 
Enthusiastic  inventors  prophesied  the  coming  of  the  day 
when  electricity  would  be  used  to  drive  all  the  wheels  of 
industry  and  to  supply  heat,  light  and  power  needed  in 
household  activities. 

Other  Mechanical  Devices.  The  two  decades  following 
1873  witnessed  the  invention  of  a  large  number  of  in- 
teresting and  valuable  mechanical  devices  which  were 
destined  to  have  an  extensive  use,  partly  for  business  pur- 
poses and  partly  for  entertainment.     The  talking-machine 


LARGE  SCALE  PRODUCTION  431 

was  invented  by  Edison  in  1878.  The  same  inventor  had 
a  large  part  in  the  development  of  the  first  successful 
motion  picture  machine.  Safety  bicycles  with  pneumatic 
tires  were  manufactured  and  sold  in  enormous  numbers. 
The  typewriter  (1878),  the  cash  register  (1885),  and  the 
recording  adding  machine  (1888),  all  of  American  origin, 
were  among  the  inventions  of  this  period.  The  most  im- 
portant foreign  invention  of  the  time  was  the  four-cycle 
internal  explosion  gas  engine  invented  by  Dr.  N.  A.  Otto, 
a  German  scientist,  in  1877.  The  Otto  engine  was  soon 
followed  by  the  Daimler  engine,  in  which,  by  the  use  of 
a  ''carburetor,"  gasoline  or  naphtha  could  be  employed  as 
a  source  of  power.  The  invention  of  the  internal  explo- 
sion engine  prepared  the  way  for  the  invention  of  the 
motor  car  or  automobile.  The  first  public  demonstration 
of  the  new  kind  of  self-propelling  vehicle  occurred  in 
France  in  1893.  Two  years  later  the  first  public  trial  of 
motor  cars  in  the  United  States  was  held  in  Chicago  under 
the  auspices  of  the  Chicago  Times-Herald.  Six  vehicles 
competed  in  a  race  to  Evanston  and  return.  Two  cars, 
both  driven  by  gasoline  engines,  completed  the  course.  The 
winner  was  an  American  car,  built  by  Charles  Duryea  of 
Springfield,  Massachusetts.  In  less  than  two  decades 
American  motor  cars  were  to  be  manufactured  by  the  thou- 
sand. 

Transportation.  Along  with  the  expansion  of  agricul- 
ture and  manufacturing  came  a  remarkable  growth  of 
railway  transportation  in  the  United  States.  The  panic 
of  1873  caused  a  halt  in  railway  building  but  the  inter- 
ruption was  of  comparatively  short  duration.  By  1880 
construction  was  going  on  more  rapidly  than  ever  before, 
and  in  the  following  ten  years  more  than  70,000  miles  of 
new  railroad  line  were  laid,  a  record  that  has  never  been 
equaled  in  any  country.  Four  new  "transcontinental 
lines"   were   completed   between   Pacific   coast   ports   and 


432  LARGE  SCALE  PRODUCTION 

points  on  the  Great  Lakes  and  the  Mississippi  River; 
numerous  branch  lines  were  added  to  the  railway  systems 
of  the  Eastern  States;  and  dozens  of  new  lines  were  con- 
structed in  the  South  and  West.  In  1890  the  railway  net 
consisted  of  167,191  miles  of  line,  a  greater  mileage  than 
all  the  countries  of  Europe  possessed  together. 

The  enormous  quantities  of  agricultural  products,  manu- 
factured goods  and  raw  materials  which  had  to  be  car- 


George  Westingliouse 

Courtesy  of  the  Westinghouse  Electric  and  Manufacturinij  Company. 

ried  over  long  distances  necessitated  the  adoption  of  large 
scale  methods  of  production  in  transportation.  Freight 
cars  of  larger  size  and  capacity,  and  locomotives  of  fifty 
tons  were  put  into  use,  while  the  railway  tracks  were 
equipped  with  heavy  steel  rails.  An  invention  which 
greatly  facilitated  the  development  of  large  scale  trans- 
portation was  the  quick-action  air  brake,  which  was  per- 
fected by  Westinghouse  in  1887.     This  type  of  brake  made 


LARGE  SCALE  PRODUCTION  433 

it  possible  to  operate  extremely  long  and  heavy  trains. 
Large  scale  methods  of  production  were  observable  in  the 
practice  of  building  specialized  types  of  cars  for  various 
kinds  of  traffic — coal  cars  with  dumping  contrivances,  tank 
cars  for  oils  and  acids,  live  stock,  refrigerator  and  heater 
ears.  The  safety  and  comfort  of  travel  were  promoted  by 
the  invention  of  the  vestibuled  passenger  car.  Block 
signaling  and  interlocking  switches  and  signals  afforded  a 
greater  measure  of  protection  against  train  accidents. 

The  development  of  railway  transportation  brought  dis- 
aster to  many  interests  engaged  in  transporting  domestic 
traffic  by  water.  During  the  first  ten  years  following  the 
Civil  War  the  Erie  Canal  and  the  Mississippi  River,  the 
two  most  important  interior  water  routes,  managed  to  re- 
tain a  fairly  large  traffic  in  the  face  of  the  keen  competi- 
tion of  the  railroads,  but  as  time  went  on  the  struggle 
became  a  losing  one  for  the  water  lines.  The  steamboat 
business  in  the  Mississippi  slowly  dwindled  away.  In  an 
effort  to  preserve  the  commerce  of  the  Erie  Canal  the 
State  of  New  York  reduced  the  canal  tolls,  and  in  1882 
abolished  them  altogether.  In  spite  of  these  measures  the 
canal  traffic  shrank  in  volume  until  the  once  great  water- 
way became  a  factor  of  little  significance  in  the  trans- 
portation system.  The  anthracite  tide-water  canals,  the 
Chesapeake  and  Ohio  Canal  and  the  remaining  canals  of 
the  Central  States  lost  virtually  all  of  their  traffic.  ]\Iany 
canals  were  abandoned.  The  competing  railways  made 
heavy  inroads  into  the  business  of  coastwise  shipping  in- 
terests which  operated  vessels  between  ports  along  the  sea- 
coast.  Though  the  tonnage  of  coastwise  shipping  continued 
to  grow,  the  rate  of  increase  was  far  less  than  the  rate 
of  expansion  of  the  industries  of  the  nation,  and  coast- 
wise commerce  lost  its  commanding  position  in  domestic 
trade.  In  one  place  only  did  water  transportation  main- 
tain   a   successful   struggle   against   competing   rail   lines. 


434  LARGE  SCALE  PRODUCTION 

This  was  on  the  Great  Lakes,  where  the  conditions  were 
peculiarly  favorable  to  the  development  of  water  trans- 
portation. At  the  western  extremity  of  the  lakes  there 
was  an  enormous  quantity  of  iron  ore,  grain  and  flour 
to  be  carried  eastward ;  the  vessels  which  carried  this 
traffic  had  return  cargoes  of  coal.  All  of  these  commodi- 
ties could  be  shipped  in  bulk  and  carried  much  more 
cheaply  by  water  than  by  rail.  The  possibility  of  full 
freights  in  both  directions  served  to  stimulate  the  opera- 
tion of  vessels  on  the  lakes,  and  while  the  water-borne 
traffic  on  rivers  and  canals  steadily  declined,  that  on  the 
lakes  made  a  rapid  increase.  The  tonnage  of  vessels  pass- 
ing through  the  Sault  Ste.  Marie  Canal  advanced  from 
690,826  tons  in  1870  to  8,454,435  tons  in  1890. 

Mining  and  Lumbering.  The  rapid  growth  of  manu- 
facturing and  transportation  gave  rise  to  a  large  demand 
for  the  raw  materials  supplied  by  mine  and  forest.  The 
coal  production  of  the  United  States,  which  amounted  to 
51,430,786  tons  in  1873,  reached  162,814,977  tons  in  1893. 
Pennsylvania  maintained  a  commanding  lead  in  the  coal 
mining  and  coke  burning  industries,  though  the  coal  fields 
of  the  Central  States  and  of  the  South  were  drawn  upon 
for  greater  and  greater  quantities  of  fuel  for  railroads  and 
factories.  The  iron  ranges  of  the  Lake  Superior  district 
contributed  more  than  half  the  annual  supplies  of  iron 
ore.  The  increased  demand  for  copper,  which  came  with 
the  growing  use  of  electric  power,  was  met  by  the  mines 
of  Michigan,  Montana  and  Arizona.  New  sources  of 
petroleum  were  found  in  Southern  California  and  in  the 
Lima  field  of  Ohio  and  Indiana.  A  new  variety  of  fuel 
came  into  use  with  the  discovery  of  natural  gas  in  Western 
Pennsylvania,  Ohio  and  Indiana.  The  discovery  of  this 
cheap  and  clean  fuel  was  followed  by  a  remarkable  growth 
of  manufacturing  in  the  "gas  belts."  Natural  gas  was 
also  used  extensively  for  household  heating  and  lighting. 


LARGE  SCALE  PRODUCTION  435 

The  demand  for  forest  products  was  no  less  pressing 
than  the  demand  for  the  mineral  resources  of  the  con- 
tinent. Building  operations  in  dozens  of  rapidly  growing 
cities  and  in  rural  districts  consumed  vast  supplies  of 
lumber;  furniture,  vehicle  and  implement  factories  ob- 
tained a  large  part  of  their  raw  material  from  the  forests; 
the  millions  of  cross-ties  used  in  railroad  construction  came 
chiefly  from  the  hardwood  forests  of  the  Central  States. 
By  1880  New  England  had  lost  precedence  to  the  States 
around  the  Great  Lakes  in  the  production  of  pine  lumber. 
Michigan  was  for  a  time  the  leading  lumber  State,  but 
as  the  forests  there  were  cut  away  the  center  of  produc- 
tion moved  westward  toward  the  magnificent  forests  of 
Wisconsin  and  Minnesota.  By  1890  the  yellow  pine  belt 
of  the  South  was  being  actively  exploited,  and  lumbering 
was  conducted  on  an  extensive  scale  in  the  States  of  the 
Pacific  coast. 

Foreign  Trade.  The  greatly  increased  production  of 
American  industry  led  to  a  prosperous  trade  with  other 
nations.  The  merchandise  exports  of  the  United  States 
grew  in  value  from  $505,033,439  in  1873  to  $1,015,732,011 
in  1892,  while  merchandise  imports  advanced  in  value  from 
$642,136,210  to  $827,402,462.  The  most  important  change 
in  the  character  of  the  export  trade  as  a  whole  was  the  in- 
creased proportion  of  foodstuffs.  While  there  was  a  sub- 
stantial gain  in  the  quantity  of  manufactured  goods  ex- 
ported, they  made  np  about  the  same  proportion  of  total 
exports  in  1890  as  in  1870.  Agricultural  products — cotton, 
grain,  provisions — made  up  more  than  three-fourths  of  the 
total  export  traffic.  The  leading  change  in  the  character 
of  the  import  trade,  as  was  pointed  out  before,  was  the 
relative  decline  of  the  imports  of  finished  manufactured 
goods  and  the  increase  in  the  imports  of  raw  materials 
to  be  used  in  American  manufacturing  industries.  Europe 
was  the  chief  purchaser  of  American  exports  as  well  as 


436  LARGE  SCALE  PRODUCTION 

the  leading  source  of  American  imports,  though  the  in- 
crease in  the  imports  of  raw  materials  tended  to  improve 
the  relative  standing  of  South  American  and  Asiatic 
countries  in  the  import  trade  of  the  United  States. 

The  Merchant  Marine.  Though  the  foreign  commerce 
of  the  United  States  had  an  unprecedented  growth  during 
the  two  decades  following  1873,  most  of  the  traffic  was 
carried  by  foreign  vessels.  The  American  shipping  in- 
dustry failed  to  prosper,  the  merchant  marine  dwindled 
away,  and  the  maritime  greatness  of  the  United  States 
became  only  a  tradition.  There  were  many  causes  for 
the  decline  of  the  American  shipping  business,  but  the 
most  important  was  the  fact  that  internal  industrial  de- 
velopment offered  greater  opportunities  for  profitable  in- 
vestment than  ocean  shipping.  In  shipping  and  naviga- 
tion American  capitalists  were  forced  to  compete  with 
foreign  rivals  who  had  many  advantages  over  American 
shipowners.  In  manufacturing,  mining  and  railroad  trans- 
portation American  capitalists  had  the  field  to  themselves, 
and  while  competition  in  domestic  industry  was  keen,  the 
competitors  at  least  struggled  with  one  another  on  fairly 
equal  terms. 

The  first  disadvantage  of  the  American  shipowner  came 
from  the  fact  that  only  American  built  vessels  could  be 
registered  under  the  American  flag.  In  the  days  when  the 
wooden  sailing  vessel  was  supreme  on  the  ocean,  the 
registry  laws  of  the  United  States  did  not  hinder  the 
growth  of  the  merchant  marine,  because  American  ship- 
builders could  build  excellent  wooden  ships  more  cheaply 
than  the  shipbuilders  of  any  other  nation.  But  the  wooden 
sailing  ship  was  compelled  to  make  way  for  the  iron,  and 
later  the  steel  steamship.  American  shipbuilders  could  not 
compete  successfully  with  foreigners  in  the  construction  of 
steel  steamships.  High  wages,  the  high  prices  of  American 
steel  plates  and  the  excessive  cost  of  other  shipbuilding  ma- 


LARGE  SCALE  PRODUCTION  437 

terials  made  it  much  more  expensive  to  build  ships  in  Amer- 
ican shipyards  than  in  the  shipyards  of  Europe.  The 
American  capitalist  who  might  desire  to  enter  the  shipping 
business  was  placed  under  a  severe  handicap  at  the  very 
outset,  therefore,  by  the  excessive  cost  of  ships.  He  suf- 
fered an  additional  disadvantage  in  that  it  cost  more  to  op- 
erate ships  under  the  American  flag  than  under  foreign 
flags.  Since  the  general  level  of  wages  was  considerably 
higher  in  the  United  States  than  in  foreign  countries  it  was 
necessary  for  American  shipowners  to  pay  high  wages  to 
their  sailors.  Few  capitalists  had  any  desire  to  engage 
in  the  shipping  business  under  such  circumstances,  and  the 
merchant  marine  was  permitted  to  languish.  By  1893  the 
registered  shipping  under  the  American  flag  had  declined 
to  899,803  tons,  just  about  one-third  the  amount  of 
registered  tonnage  in  1861. 

There  was  much  regret  over  the  loss  of  the  merchant 
marine.  From  early  colonial  times  down  to  the  beginning 
of  the  Civil  War  shipping  and  navigation  had  occupied  a 
high  place  among  American  industries.  At  times  American 
vessels  had  carried  as  much  as  ninety  per  cent  of  the  exports 
and  imports  of  the  nation.  In  1893  only  12.2  per  cent 
of  the  country's  foreign  trade  was  carried  in  domestic 
vessels.  Since  foreign  ships  could  carry  freight  more 
cheaply  than  American  ships,  it  was  useless  to  expect  a 
revival  of  merchant  shipping  until  an  effort  was  made 
to  remove  the  competitive  disadvantages  to  which  Ameri- 
can shipowners  were  subjected.  Congress  refused  to  re- 
move the  high  tariff  duties  imposed  on  materials  used  in 
building  iron  and  steel  ships.  It  was  impossible  for  Con- 
gress to  enact  legislation  which  would  satisfy  all  interests. 
Shipowners  would  have  welcomed  a  policy  of  "free  ship- 
ping" under  which  they  could  have  purchased  foreign 
ships  for  American  registry;  shipbuilders  strenuously  op- 
posed the   admission  of   foreign-built  ships,   though  they 


438  LARGE  SCALE  PRODUCTION 

favored  free  trade  in  all  shipbuilding  materials;  manufac- 
turers of  steel  plates  and  other  materials  naturally  resisted 
any  effort  to  reduce  or  remove  the  protective  duties  on 
their  products.  A  law  enacted  in  1890  providing  for  the 
free  admission  of  shipbuilding  materials  contained  a  clause 
which  stipulated  that  ships  built  of  materials  imported  free 
of  duty  should  not  be  permitted  to  engage  in  the  coast- 
wise trade  for  more  than  two  months  in  a  single  year. 
This  clause  virtually  deprived  the  law  of  any  practical 
value  it  might  otherwise  have  had  in  stimulating  ship- 
building and  ship  operation. 

It  was  urged  frequently  that  Congress  should  grant  sub- 
sidies to  encourage  the  shipping  industry.  Perhaps  a 
generous  subsidy  policy  would  have  been  followed  during 
this  period  had  it  not  been  for  the  dishonorable  practices 
discovered  in  connection  with  the  enactment  of  a  subsidy 
law  in  1872,  The  exposure  of  corrupt  lobbying  not  only 
led  to  the  repeal  of  the  Act  of  1872  but  it  cast  so  much 
discredit  upon  the  entire  practice  of  giving  subsidies  to 
shipping  interests  that  no  more  subsidy  legislation  could 
be  passed  for  several  years.  Finally  in  1891  a  law  was 
enacted  authorizing  the  payment  of  certain  sums  to  steam- 
ship interests  as  compensation  for  carrying  mail  on  ves- 
sels of  American  construction  and  registry.  The  pay- 
ments authorized  were  not  large,  however,  and  only  a 
few  lines  took  advantage  of  the  provisions  of  the  law. 

It  cannot  be  said  that  the  lack  of  an  American  merchant 
marine  was  seriously  detrimental  to  American  industry. 
Foreign  ships  carried  the  exports  and  imports  of  the 
United  States  more  cheaply  than  American  ships  could 
have  carried  them  and  the  service  was  just  as  efficient 
as  it  would  have  been  if  performed  by  American  vessels. 
The  nation  did  not  feel  keenly  a  need  of  shipping  lines 
to  open  up  new  markets  for  exports,  because  American 
exports  consisted  largely  of  raw  materials  and  foodstuffs. 


LARGE  SCALE  PRODUCTION  439 

for  the  sale  of  which  no  complex  organization  of  trans- 
portation and  selling  agencies  was  necessary.  The  United 
States  had  a  large  export  trade,  but  the  commodities  sent 
abroad  "sold  themselves."  American  business  interests 
needed  little  of  the  "technique"  of  foreign  trade  so  neces- 
sary to  a  nation  which  exports  articles  that  compete 
strongly  with  similar  articles  sold  by  other  nations.  The 
need  for  shipping  was  not  so  pronounced  as  it  might  have 
been  had  the  export  trade  been  of  a  different  character. 
Later,  during  the  early  years  of  the  twentieth  century, 
when  American  manufacturers  began  to  compete  with 
European  rivals  in  the  markets  of  the  world,  the  lack  of  an 
American  merchant  marine  proved  to  be  a  serious  handi- 
cap. 

Another  reason  why  the  decline  of  the  merchant  marine 
caused  little  anxiety  was  that  the  period  from  1874  to  1894 
was  in  general  a  period  of  peace  throughout  the  world. 
No  business  is  more  quickly  or  more  acutely  affected  by 
war  than  the  shipping  business.  A  nation  which  has  a 
large  foreign  commerce  and  a  small  merchant  marine  is 
invariably  placed  in  an  unfortunate  condition  when  a  war 
breaks  out,  and  if  the  nation  takes  part  in  the  war  its  lack 
of  shipping  may  prove  to  be  a  source  of  serious  danger. 
The  possibility  of  war  makes  it  highly  advisable  for  great 
commercial  nations  to  have  their  own  merchant  marine. 
The  United  States  suffered  considerable  inconvenience 
during  the  Spanish-American  War  because  of  the  scarcity 
of  American  ships.  During  the  recent  World  War  the 
lack  of  sufficient  shipping  to  satisfy  the  military  and  com- 
mercial needs  of  the  United  States  compelled  the  Govern- 
ment to  adopt  heroic  measures  to  meet  the  deficiency. 

Questions  and  Topics 

1.  Is  it  ever  possible  for  the  total  value  of  a  small  com  . 
or  wheat  crop  to  exceed  the  value  of  a  large  one? 


440  LARGE  SCALE  PRODUCTION 

2.  What  nations  of  the  world  are  largely  dependent  upon 
the  American  wheat  crop? 

3.  Make  a  list  of  imported  food  products  that  could  be 
grown  in  the  United  States,  and  tell  why  they  are  not. 

4.  Make  a  list  of  all  the  principal  electrical  appliances 
now  used. 

5.  On  an  outline  map,  show  the  principal  railroad  sys- 
tems of  the  United  States. 

6.  Which  will  be  first  exhausted,  the  mines,  fisheries,  or 
forests  of  the  United  States  ?     Why  ? 

7.  What  other  countries  besides  the  United  States  have 
great  undeveloped  resources? 


CHAPTER  XXII 

PRICES  AND  WAGES;  LABOR  TROUBLES;   EARLY 
INDUSTRIAL  COMBINATIONS 

The  Decline  of  Prices.  The  quarter  of  a  century  fol- 
lowing the  panic  of  1873  witnessed  an  increase  in  the 
production  of  useful  commodities  throughout  the  United 
States  that  was  much  greater  than  the  increase  in  the 
number  of  people.  The  supply  of  goods  tended  to  increase 
more  rapidly  than  the  demand  for  them.  Since  industry 
was  in  the  main  competitive  the  increased  per  capita  pro- 
duction was  accompanied  by  a  reduction  in  the  prices  of 
nearly  all  domestic  products.  For  the  most  part  the  fall 
of  prices  was  continuous,  though  at  times,  under  the 
stimulus  of  exceptional  activity  in  certain  fields  of  in- 
dustry such  as  railroad  construction,  or  because  of  an  un- 
usually heavy  foreign  demand  for  American  farm  products, 
prices  would  for  a  time  take  an  upward  trend.  During 
the  four  years  following  1875  there  was  a  steady  and 
somewhat  rapid  decline  of  prices.  In  1879  and  again  in 
1880  the  United  States  had  an  exceedingly  good  wheat 
crop,  while  the  European  crop  was  a  failure  in  both  these 
years.  American  wheat  brought  a  high  price.  The  pros- 
perity of  the  farmers  was  reflected  in  an  enlarged  demand 
for  manufactured  goods  of  all  kinds.  The  general  stimu- 
lation of  business  caused  prices  to  advance  for  a  brief 
period,  but  by  1882  supply  had  again  overtaken  demand 
and  the  decline  of  prices  was  resumed.  The  fluctuation 
of  prices  for  the  next  twelve  years  was  not  great  in  either 
direction ;  in  1893  a  general   decline  set  in  which  lasted 

441 


442 


PRICES  AND  WAGES 


until  1897.  The  trend  of  prices  from  1873  to  1897  is  in- 
dicated in  the  following  table,  which  gives  the  prices  of 
a  few  standard  commodities: 


Corns 

Wheat  2 

Cotton  3 

Pig  Iron  ■* 

Steel  Rails  5 

Period 

Cents  Per 

Cents  Per 

Cents  Per 

Dollars 

Dollars 

Jiusliel 

Bushel 

Pound 

Per  Ton 

Per  Ton 

1806- 

-75  1 

47.8 

108.6 

187(5- 

-85  1 

40.1 

92.6 

11.5 

22.6  i 

46.93 

188G- 

-90  1 

37.7 

76.0 

10.2 

18.94 

32.49 

1891 

40.0 

83.9 

8.60 

17.52 

29.92 

1892 

39.4 

62.4 

7.71 

15.75 

30.00 

1893 

36.5 

53.8 

8.56 

14. .52 

28.12 

1894 

45.7 

49.1 

6.94 

12.66 

24.00 

1895 

25.3 

50.9 

7  44 

13.10 

24.33 

1S9U 

21.5 

72.5 

7.93 

12.95 

28.00 

1897 

26.3 

80.8 

7.00 

12.10 

18.75 

1  Average  price  per  year  for  term  of  years. 
-  Farm   value. 

3  Net  Prices  at  New  York. 

4  At  Philadelphia. 

5  At  mills  in  Pennsylvania. 

Influence  of  Changing  Prices.  With  a  constantly  in- 
creasing production  of  goods  of  every  description  the  real 
wealth  of  the  United  States  grew  at  a  rapid  rate,  but  not- 
withstanding the  great  increase  of  goods  many  people  in 
the  country  suffered  hardships  which  made  it  appear  that 
the  additional  wealth  which  was  being  created  in  such 
large  quantities  was  a  source  of  economic  misery  rather 
than  of  economic  prosperity.  These  hardships  were  caused 
primarily  by  the  fall  of  prices.  The  price  system  of  the 
modern  economic  organization  is  a  .source  of  frequent 
trouble.  ]\Ioney  and  credit  have  been  indispensable  factors 
in  the  development  of  our  complex  economic  system  but 
we  have  not  attained  perfection  in  their  use. 

If  all  business  were  transacted  on  a  cash  basis  and  if 
the  prices  of  all  commodities  and  of  labor  changed  at  a 
uniform  rate,  a  change  in  the  level  of  prices  would  not 
have  many  ill  effects.  For  instance  a  man  might  spend 
$100,000  on  raw  materials  and  labor  to  produce  commodi- 


PRICES  AND  WAGES  443 

ties  wheh  upon  completion  he  expects  to  sell  for  $110,000. 
If  the  price  of  the  article  which  he  makes  declines  so  that 
he  receives  but  $90,000  he  will  have  lost  none  of  his  pros- 
pective profit  provided  the  prices  of  labor  and  of  other 
commodities  have  declined  at  the  same  rate  at  which  the 
price  of  his  own  product  declined.  His  $90,000  will  buy- 
just  as  much  as  the  $110,000  would  have  purchased  had 
prices  remained  unchanged.  On  the  other  hand  if  the 
price  of  his  product  advances  so  that  he  receives  $120,000 
he  will  have  gained  nothing  extra  if  the  prices  of  other 
things  have  made  a  similar  advance. 

However  the  price  system  does  not  work  out  this  way. 
In  the  first  place  a  vast  amount  of  the  business  of  the 
world  is  done  on  a  credit  basis.  Suppose  the  individual 
above  had  borroived  the  $100,000  and  the  price  of  his 
product  declined  so  that  he  received  but  $90,000.  He 
would  have  to  return  $100,000  to  his  creditor,  and  even  if 
the  fall  of  prices  had  been  uniform  he  could  not  have 
avoided  loss.  The  creditor  would  of  course  make  a  sub- 
stantial gain  merely  from  the  change  in  the  price  level. 
Creditors  as  a  class  derive  benefit  from  falling  prices,  while 
the  debtor  class  is  always  aided  by  an  advancing  price 
level. 

Even  if  the  element  of  credit  did  not  enter  into  the  prob- 
lem of  prices,  individuals  would  suffer  because  of  the  lack 
of  uniformity  in  price  changes.  The  conditions  of  sup- 
ply and  demand  are  always  different  for  different  com- 
modities. An  unusually  large  wheat  crop  may  cause  the 
price  of  wheat  to  fall  to  an  extremely  low  level.  If  there 
is  no  corresponding  reduction  in  the  price  of  other  com- 
modities the  farmers  whose  wheat  crops  are  not  large 
enough  to  offset  the  reduced  price  are  bound  to  sustain 
a  loss.  Too  many  competing  manufacturers  may  tempo- 
rarily engage  in  the  production  of  some  single  commodity 
with  disastrous  results  to  all  of  them.     It  has  previously 


444  PRICES  AND  WAGES 

been  pointed  out  that  commodity  prices  and  wages  do 
not  advance  and  recede  uniformly,  the  movement  of  wages 
invariably  lagging  behind  the  movement  of  prices.  When 
commodity  prices  decline  employers  endeavor  to  reduce  the 
wages  of  their  workmen ;  the  laborers  naturally  oppose  such 
efforts.  When  prices  advance  workingmen  try  to  obtain 
higher  wages,  and  they  are  usually  resisted  by  their  em- 
ployers. During  times  of  declining  prices  the  profits  of 
the  employers  are  likely  to  shrink  because  of  the  difficulty 
they  meet  in  efforts  to  depress  wages;  when  prices  are  ad- 
vancing profits  are  usually  large.  A  general  advance  or  a 
general  decline  of  prices  is  always  accompanied  by  labor 
disturbances,  and  the  more  rapid  the  rise  or  the  fall  of  pri- 
ces the  more  serious  the  labor  disturbances  are  likely  to  be. 

Effects  of  Competition.  The  chief  reason  for  the  down- 
ward trend  of  prices  following  1873  was  the  fact  that 
business  was  in  the  main  intensely  competitive.  The 
wonderfully  rich  and  varied  natural  resources  in  the 
United  States  afforded  almost  unlimited  opportunity  for 
industrial  development.  Though  competition  kept  prices 
down  there  was  usually  in  each  field  of  industry  a  number 
of  producers  who,  by  using  novel  methods,  improved 
processes  and  superior  organization,  were  able  to  obtain 
handsome  profits,  while  their  less  capable  or  less  favorably 
situated  rivals  produced  at  a  loss.  New  venturers  were  at- 
tracted by  the  good  fortune  of  the  strong  and  success- 
ful instead  of  being  repelled  by  the  mishaps  of  the  weak, 
and  the  number  of  competitors  in  many  industries  tended 
to  increase.  As  the  number  grew  the  quantity  of  goods 
produced  mounted,  prices  fell,  and  the  struggle  for  sur- 
vival became  more  intense. 

In  agriculture  a  good  crop  year  at  a  time  when  the 
foreign  demand  was  unusually  strong  would  stimulate 
activity  in  planting  for  the  following  year.  If  the  season 
proved  to  be  favorable  the  market  would  be  glutted  and 


PRICES  AND  WAGES  445 

prices  would  fall  to  a  ruinous  level.  The  farmers  who 
lived  at  some  distance  from  a  central  market  would  see 
their  expected  profits  entirely  absorbed  by  transportation 
costs.  It  sometimes  happened  that  Western  farmers  would 
make  no  effort  to  market  their  surplus  grain,  letting  the 
wheat  rot  in  the  field  and  using  their  corn  for  fuel.  Under 
such  conditions  many  farmers  who  had  borrowed  money 
to  purchase  their  lands  lost  their  homes  through  the  fore- 
closure of  mortgages.  The  holders  of  mortgages  would 
often  lose  part  of  their  investment  because  the  price  of 
land  would  fall  so  low  that  forced  sales  would  not  yield 
enough  to  cover  the  loans.  Many  Eastern  investors  lost 
large  sums  of  money  through  the  purchase  of  Western  farm 
mortgages.  The  difficulties  of  the  farmers  were  often  ag- 
gravated by  unduly  high  and  discriminatory  railroad 
rates,  and  the  population  of  many  Western  rural  districts 
attributed  all  their  woes  to  the  grasping  policy  of  the  rail- 
road corporations.  Since  the  railroads  were  controlled 
largely  by  Wall  Street  financiers  the  farmers  came  to  have 
a  deep  antipathy  to  "Wall  Street"  and  its  "money 
barons,"  an  antipathy  that  has  never  been  eradicated. 

The  railroad  corporations  were  in  many  instances  no 
better  off  than  the  farmers.  IMany  new  roads  were  con- 
structed and  the  excessive  competition  of  rival  lines,  which 
had  produced  such  disastrous  results  previous  to  the  panic 
of  1873,  continued  to  create  confusion  in  the  railroad  busi- 
ness. Railway  transportation,  when  conducted  on  a  com- 
petitive basis,  is  likely  to  invite  keener  rivalry  than  any 
other  kind  of  business.  In  its  earlier  stages  railway  trans- 
portation is  a  business  of  increasing  returns.  A  very  sub- 
stantial increase  in  traflfie  will  bring  in  large  additional 
revenue,  but  cause  a  comparatively  small  increase  in  ex- 
pense. The  "fixed"  or  "overhead"  charges  in  railway 
transportation  usually  constitute  about  two-thirds  of  the 
total  expenses.     These  expenses  are  the  same  from  year  to 


446  PRICES  AND  WAGES 

year  whether  traffic  is  great  or  small.  For  this  reason  a 
railroad  is  under  the  strongest  pressure  to  increase  its 
traffic  by  all  possible  means.  A  large  quantity  of  freight 
carried  at  comparatively  low  rates  produces  a  greater  net 
return  than  a  small  quantity  of  traffic  carried  at  high  rates. 
Rival  railroads  endeavor  to  attract  traffic  from  one  an- 
other by  offering  service  at  reduced  rates.  Unfortunately 
when  competition  in  rates  once  begins  it  is  usually  carried 
too  far.  One  line  cannot  afford  to  charge  higher  rates  for 
a  particular  service  than  is  charged  by  a  rival  line.  "Cut- 
throat competition"  often  carries  rates  considerably  below 
the  actual  cost  of  transportation,  but  even  when  this  occurs 
the  railroads  do  not  go  out  of  business.  A  road  that  is 
earning  its  "fixed  charges"  and  ever  so  small  a  portion  of 
its  other  expenses  is  temporarily  better  off  than  a  road 
which  is  idle  and  not  even  earning  its  "fixed  charges." 
Throughout  the  seventies  competing  rail  lines  in  various 
sections  of  the  United  States  engaged  in  bitter  struggles 
for  competitive  traffic,  with  the  result  that  many  com- 
panies met  with  large  losses.  An  evil  result  of  the  exces- 
sive reduction  of  rates  on  competitive  traffic  was  the  at- 
tempt of  the  fighting  railroads  to  recoup  their  losses  in 
part  by  charging  unrea.sonably  high  rates  on  the  traffic 
for  which  there  was  no  competition. 

In  nearly  all  branches  of  manufacturing,  in  nearly  all 
the  mineral  industries  and  in  lumbering,  the  same  vigor- 
ous competition  took  place.  Great  factories  operated  on 
a  large  scale  have  heavy  overhead  charges,  just  as  rail- 
roads, and  the  competitive  struggle  of  large  plants  is  often 
of  the  "cutthroat"  kind.  In  face  of  the  decline  of  prices 
the  output  of  manufactured  goods  in  the  United  States 
continued  to  grow.  The  economies  of  large  scale  produc- 
tion enabled  many  of  the  larger  establishments  to  earn 
fair  profits.  When  competition  became  especially  vigor- 
ous the  smaller  plants  would  shut  down  until  market  con- 


PRICES  AND  WAGES  447 

ditions  became  more  favorable.  Little  effort  was  made 
to  export  American  manufactures  when  the  domestic 
market  declined,  because  even  with  the  vigorously  com- 
petitive conditions  in  this  country,  the  cost  of  produc- 
tion of  virtually  all  manufactured  goods  was  higher  than 
in  Europe,  because  of  the  higher  level  of  American  wages. 
American  manufacturers  could  sell  their  products  in  their 
home  market  because  they  were  protected  by  a  high  tariff, 
but,  with  a  few  exceptions,  they  were  not  able  to  compete 
in  the  markets  of  the  world.  In  a  few  industries  large 
scale  methods  of  production  enabled  the  American  manu- 
facturer to  overcome  the  disadvantage  of  high  labor  costs, 
and  produce  for  the  foreign  market,  and  in  a  few  industries 
the  excellence  of  the  American  product  enabled  the  manu- 
facturers to  meet  the  competition  of  foreign  products, 
which  were  cheaper  but  poorer  in  quality.  American  sew- 
ing-machines and  agricultural  implements  in  particular 
began  to  have  an  extensive  sale  abroad. 

Wage  Reductions  and  Labor  Disturbances,  1877-1886. 
In  many  industries  employers  tried  to  meet  the  losses  due 
to  declining  prices  by  reducing  the  wages  of  their  work- 
men. The  upward  movement  of  wages  which  began  with 
the  rise  of  prices  in  the  Civil  War  period  reached  its  apex 
about  1873  and  for  a  time  thereafter  the  level  of  wages  de- 
clined. The  laborers  strenuously  opposed  wage  reductions. 
The  years  between  1873  and  1896  witnessed  a  large  number 
of  labor  disturbances,  some  of  the  most  notable  strikes  in 
the  history  of  the  United  States  occurring  during  this 
period. 

During  the  year  1877  there  were  several  great  railroad 
strikes,  the  first  of  which  was  on  the  Baltimore  and  Ohio 
Railroad.  The  primary  cause  of  this  strike  was  a  ten  per 
cent  reduction  in  wages,  but  irregular  employment,  ir- 
regular payment  of  wages  and  unsatisfactory  methods  of 
computing   wages   were   contributing   causes.     The   strike 


448  PRICES  AND  WAGES 

began  at  Martinsburgh,  West  Virginia,  on  July  16.  Riot- 
ing strikers  at  that  point  tried  to  prevent  the  operation 
of  trains  by  destroying  the  property  of  the  railroad  com- 
pany. The  state  militia  was  called  out  to  suppress  the 
disorder,  but  instead  of  attacking  the  strikers  the  guards- 
men fraternized  with  them.  Upon  the  appeal  of  the  Gov- 
ernor of  West  Virginia  President  Haj'es  sent  a  detach- 
ment of  Federal  troops  to  the  scene  of  the  riot  and  order 
was  soon  restored.  Another  outbreak  occurred  at  Cumber- 
land, IMaryland.  Upon  orders  from  the  Governor  of  Mary- 
land two  regiments  of  Baltimore  militia  mobilized  and  pre- 
pared to  depart  for  Cumberland.  While  marching  to  the 
passenger  station  in  Baltimore  they  were  attacked  by  a 
mob  of  strikers  and  strike  sympathizers,  and  in  the  fight- 
ing which  followed  several  people  were  killed  and  the 
railroad  station  partiall}'  destroyed  by  fire.  The  militia 
proving  unequal  to  the  task  of  subduing  the  angry  popu- 
lace. Federal  troops  were  again  used  to  quell  the  uprising. 
Even  more  serious  than  the  Baltimore  and  Ohio  strike 
was  the  strike  of  the  employees  of  the  Pennsjdvania  Rail- 
road at  Pittsburgh,  which  began  on  July  19.  This  strike 
was  likewise  due  primarily  to  wage  reductions,  though 
the  actual  outbreak  was  precipitated  by  an  order  given 
by  the  railroad  management  with  respect  to  the  method  of 
operating  trains  between  Pittsburgh  and  Altoona.  Riot- 
ing began  soon  after  the  men  stopped  work  and  the  city 
became  a  scene  of  wild  disorder.  Neither  the  municipal 
nor  the  county  authorities  were  disposed  to  protect  the 
railroad  company's  property,  and  the  militia  wliich  went 
to  Pittsburgh  at  the  orders  of  the  State  officials  did  not 
succeed  in  conquering  the  mob.  Before  Federal  troops 
could  reach  the  city  some  1,600  freight  and  passenger 
cars,  125  locomotives,  and  the  railroad  shops  were  de- 
stroyed by  fire.  About  twenty-five  people  lost  their  lives 
in  the  course  of  this  strike ;  the  property  damage  was  more 


PRICES  AND  WAGES  449 

than  three  and  a  half  million  dollars.  The  Pennsylvania 
Railroad  Company  brought  suit  against  Allegheny  County 
because  of  the  refusal  of  the  county  officials  to  provide 
adequate  police  protection,  and  obtained  a  judgment  for 
the  amount  of  damage  sustained. 

Several  other  railroad  strikes  occurred  in  both  the 
Eastern  and  the  Central  States  during  1877.  There  were 
also  many  strikes  among  mine  and  factory  workers.  In  a 
number  of  places  there  was  rioting  and  loss  of  life,  though 
no  other  city  witnessed  such  disorder  as  occurred  in  Pitts- 
burgh. 

While  labor  unions  were  involved  in  the  major  labor  dis- 
turbances of  1877,  for  the  most  part  the  strikes  represented 
the  spontaneous  action  of  discontented  laborers  in  single 
localities.  Neither  the  Baltimore  and  Ohio  strike  nor  the 
Pennsylvania  strike  was  called  by  a  labor  organization, 
though  on  the  Pennsylvania  Railroad  there  had  been  an 
abortive  effort  to  call  a  strike  about  three  weeks  before 
the  Pittsburgh  trouble  took  place.  The  lack  of  cohesive 
organization  among  tiie  striking  workmen  placed  them  at 
a  disadvantage  in  conducting  the  strikes,  and  the  disorder 
which  accompanied  nearly  all  the  walkouts  tended  to  de- 
prive the  laborers  of  whatever  public  sympathy  they  might 
otherwise  have  had.  Nearly  all  the  strikes  of  1877  were 
lost  by  the  workmen,  but  their  failure  only  tended  to  create' 
a  demand  for  more  effective  labor  organization. 

The  next  'Miistoric  strike,"  which  occurred  in  1883,  was 
that  of  the  commercial  telegraph  operators.  This  strike 
was  an  aggressive  move  on  the  part  of  the  Brotherhood  of 
Telegraphers  to  obtain  higher  wages,  the  abolition  of  Sun- 
da}'  work  without  extra  pay,  and  the  reduction  of  the  day's 
work  to  eight  hours.  The  men  were  out  for  more  than 
a  month,  and  they  succeeded  in  getting  some  railroad 
telegraphers  to  join  them  in  the  strike.  Though  the  strike 
was  unsuccessful  it  represented  a  much  more  formidable 


450  PRICES  AND  WAGES 

attempt  on  the  part  of  labor  than  the  unsuccessful  walk- 
outs of  1877. 

In  March,  1885,  the  employees  of  the  Gould  system  of 
railways  in  the  Southwest  went  out  in  a  strike  in  protest 
against  a  reduction  of  wages  made  in  spite  of  the  fact 
that  the  earnings  of  the  railroads  were  at  the  time  not 
showing  a  decline.  The  operation  of  the  Missouri  Pacific 
Railroad  and  of  the  Missouri,  Kansas  and  Texas  had  to 
be  almost  completely  suspended  on  account  of  the  walk- 
out. Though  the  people  of  the  Southwest  suffered 
severely  by  reason  of  the  interruption  of  the  railroad 
service  their  sympathies  were  almost  entirely  with  the 
striking  workmen.  The  strike  lasted  but  ten  days,  end- 
ing in  a  complete  victory  for  the  strikers.  The  rail- 
road officials  agreed  to  restore  the  wage  scale  of  1884  and 
to  take  all  the  strikers  back  in  their  old  positions  without 
prejudice.  Emboldened  by  their  victory  the  men  became 
overconfident  of  their  strength  and  adopted  a  dictatorial 
attitude  toward  their  employers.  In  March,  1886,  a  fore- 
man of  the  Texas  and  Pacific  Railroad  was  discharged  for 
incompetence.  He  was  an  influential  member  of  the 
Knights  of  Labor,  and  succeeded  in  having  a  second  strike 
called  by  this  organization,  the  claim  being  made  that  the 
action  of  the  railroad  company  in  arbitrarily  discharging 
the  foreman  was  a  violation  of  the  agreement  which  ended 
the  strike  of  the  preceding  year.  The  railroad  officials 
flatly  declined  to  treat  with  the  representatives  of  the 
Knights  of  Labor,  and  this  time  the  strikers  received  but 
little  public  sympathy.  After  freight  traffic  had  been 
suspended  for  nearly  a  month  the  strike  was  called  off. 
The  result  of  this  ill-advised  strike  was  the  virtual  dis- 
integration of  the  Knights  of  Labor,  which  up  to  this  time 
had  been  steadily  increasing  in  strength. 

Labor  Organization;  The  American  Federation  of 
Labor.     The    disintegration    of    the    Knights    of    Labor 


PRICES  AND  WAGES  451 

marked  the  failure  of  the  first  effort  in  America  to  organize 
wage  earners  as  a  class  without  regard  to  the  vocation  of 
the  individual.  But  the  failure  of  this  organization  did 
not  mean  the  ending  of  the  labor  organization  movement. 
In  fact  the  organization  of  trade-unions,  each  made  up  of 
workers  employed  in  single  vocations,  made  more  rapid 
progress  as  the  prestige  of  the  Knights  of  Labor  declined. 
The  trades  in  which  unions  had  been  established  were  more 
thoroughly  organized  and  many  new  unions  were  estab- 
lished in  additional  industries. 

"While  the  diversity  of  interests  of  wage  earners  in 
separate  vocational  fields  seemed  too  great  to  permit  of  the 
creation  of  a  single  great  labor  union,  the  laboring  classes 
as  a  whole  possessed  sufficient  common  interests  to  render 
attractive  some  form  of  organization  through  which  these 
common  interests  could  be  served.  In  1881  a  labor  con- 
vention held  at  Terre  Haute,  Indiana,  adopted  tentative 
plans  for  the  combination  of  the  various  labor  organiza- 
tions of  the  country  into  a  "federation  of  trades  and  labor 
unions."  At  a  convention  held  in  Pittsburgh  later  in  the 
same  year  these  plans  took  definite  shape  in  the  formation 
of  an  organization  known  as  the  "Federation  of  Organized 
Trades  and  Labor  Unions  of  the  United  States  and  Can- 
ada." Five  years  later  this  body  was  reorganized  at  a 
convention  held  in  Columbus,  Ohio,  the  new  organization 
taking  the  name  of  the  American  Federation  of  Labor. 
This  organization,  which  still  exists  as  the  most  powerful 
labor  body  of  America,  is,  as  the  name  implies,  a  combina- 
tion of  other  labor  organizations.  The  Federation  exer- 
cises little  direct  control  over  its  affiliated  societies,  each  of 
which  has  a  constitution  and  government  distinctly  its 
own.  The  purpose  of  the  Federation  from  the  beginning 
has  been  to  encourage  the  formation  of  labor  unions,  and 
to  bring  about  the  cooperation  of  local  branches  of  various 
unions  through  the  establishment  of  State  and  local  Fed- 


452  PRICES  AND  WAGES 

erations.  The  great  majority,  though  not  all,  of  the  labor 
unions  of  the  United  States  have  become  affiliated  with  the 
American  Federation  of  Labor,  and  through  the  aid  of  this 
organization  they  have  been  able  to  promote  the  welfare  of 
labor  by  seeking  the  enactment  of  favorable  legislation,  by 
fostering  the  organization  of  new  unions,  and  by  extending 
to  one  another  financial  and  moral  support  during  contro- 
versies with  employers.  The  Federation,  as  such,  has  never 
had  the  authority  to  call  a  strike,  but  it  has  often  rendered 
effective  assistance  to  its  constituent  unions  when  strikes 
and  lockouts  have  taken  place. 

With  more  effective  organization  labor  was  able  to  offer 
successful  resistance  to  the  attempts  to  depress  the  level 
of  wages  after  1877.  Statistics  show  that  after  a  rapid 
drop  from  1873  to  1879  the  average  daily  wages  of  labor  be- 
gan to  rise  and  continued  to  advance  slowly  but  in  the 
main  steadily  till  1893.  However,  the  increased  average 
wages  w^ere  of  comparatively  little  benefit  to  the  workers 
because  of  the  frequent  recurrence  of  seasons  of  unem- 
ployment in  nearly  all  industries.  Wage  earners  as  a 
whole  are  improvident,  the  great  majority  of  them  living 
up  to  their  income  as  fast  as  it  is  received.  For  this  rea- 
son they  get  along  much  better  with  a  relatively  low  wage 
and  steady  work  than  with  high  wages  and  irregular 
employment.  A  comparison  of  the  curves  of  wages  and 
the  cost  of  living  for  the  periods  between  1873  and  1896 
and  between  1897  and  1916  would  seem  to  indicate  that 
labor  was  much  more  prosperous  during  the  former  period 
than  in  the  latter.  Yet  the  reverse  is  true,  because  during 
the  later  years  wage  earners  had  more  steady  employment. 

The  Haymarket  Square  Riot.  The  year  1886,  which 
witnessed  the  disastrous  strike  on  the  Gould  railroads,  was 
a  year  of  many  notable  labor  disturbances.  Commercial 
and  financial  depression  caused  many  industries  to  close 
down,  creating  a  large  army  of  unemployed  workmen.     In 


PRICES  AND  WAGES  453 

many  industries  that  were  not  entirely  suspended  the  dis- 
charge of  workmen  and  the  reduction  of  wages  caused 
much  unrest  and  discontent.  Labor  organizations,  increas- 
ing in  number  and  in  strength,  not  only  firmly  opposed  the 
reduction  of  wages,  but  they  began  to  take  a  more  aggres- 
sive stand  in  favor  of  higher  wages,  shorter  hours,  the 
"closed  shop,"  and  better  working  conditions.  Foreign 
labor  agitators  and  radicals  of  various  types  became  active 
in  American  industrial  centers,  spreading  the  revolution- 
ary propaganda  which  had  served  to  foment  industrial  and 
political  disturbances  in  a  number  of  European  countries. 
One  result  of  the  unsettled  conditions  in  American  indus- 
tries was  the  famous  Haymarket  Square  riot  in  Chicago. 

On  May  1,  1886,  an  attempt  was  made  to  call  a  general 
strike  in  all  Chicago  industries  for  the  purpose  of  estab- 
lishing an  eight-hour  day.  A  large  number  of  men  quit 
work  and  several  local  disturbances  took  place,  the  most 
serious  being  near  the  large  McCormick  Reaper  Works, 
which  at  the  time  was  being  operated  by  non-union  men. 
Some  anarchists,  taking  advantage  of  the  general  unrest, 
called  a  meeting  of  workingmen  for  the  evening  of  May  4, 
to  protest  against  the  activities  of  the  police  in  suppressing 
the  riotous  disturbances  of  the  three  previous  days.  A 
large  crowd  assembled  in  Haymarket  Square  to  listen  to 
the  inflammatory  speeches  of  the  anarchists.  When  one 
of  the  speakers  began  to  urge  the  use  of  violence  a  detach- 
ment of  police  from  a  nearby  station  marched  into  the 
Square  to  disperse  the  meeting.  One  of  the  anarehists 
hurled  a  dynamite  bomb  into  the  midst  of  the  advancing 
policemen,  killing  one  instantly  and  mortally  wounding 
seven  others.  This  shocking  tragedy  created  a  profound 
sensation  throughout  the  country.  It  called  attention  to 
the  lack  of  adequate  methods  for  the  amicable  adjustment 
of  disputes  between  wage  earners  and  their  employers,  and 
showed  the  need  of  taking  steps  to  curb  the  activities  of 


454  PRICES  AND  WAGES 

dangerous  foreign  radicals  who  were  endeavoring,  by  ex- 
hortation and  by  example,  to  incite  deeds  of  violence  and 
terror. 

The  Homestead  Strike.  The  next  famous  strike  of  this 
period  was  that  of  the  employees  of  the  Carnegie  Steel 
Company  at  Homestead,  Pennsylvania,  in  July  1892.  Late 
in  June  the  Company  announced  a  new  wage  scale  which 
provided  for  a  reduction  of  the  wages  of  a  small  number 
of  its  workmen.  The  Amalgamated  Association  of  Iron 
and  Steel  Workers  opposed  the  reduction  of  wages;  the  of- 
ficials of  the  Company,  refusing  to  deal  with  representa- 
tives of  the  union,  closed  the  plant  and  declared  their  in- 
tention of  operating  the  mills  with  non-union  men.  The 
workmen  prepared  to  resist  with  violence  the  employment 
of  strike  breakers,  took  possession  of  the  steel  works,  and 
defied  the  sheriff  and  his  deputies  who  tried  without  suc- 
cess to  dislodge  them.  The  Company  engaged  some  three 
hundred  Pinkerton  detectives  to  recapture  the  mill  prop- 
erty. Armed  with  repeating  rifles  the  detectives  manned 
two  barges  and  attacked  the  workmen  from  the  river.  A 
two  days'  battle  resulted  in  the  complete  defeat  of  the 
Pinkerton  men,  who  were  forced  to  surrender,  give  up  their 
arms  and  leave  the  scene  of  the  battle  under  guard.  On 
July  12  the  entire  force  of  militia  of  Pennsylvania,  some 
8,000  in  number,  entered  Homestead,  and  under  the  pro- 
tection of  these  troops  the  Company  regained  control  of 
its  property,  ejected  the  strikers  and  resumed  operation 
with  non-union  workmen.  The  strike  was  a  complete  fail- 
ure for  the  union,  though  it  was  not  officially  declared  at 
an  end  until  late  in  November. 

The  Pullman  Strike.  Perhaps  the  most  notable  of  all 
labor  disturbances  which  have  occurred  in  the  United  States 
was  the  great  Pullman  strike  of  1894.  This  strike  began 
in  a  small  way  in  June  when  the  employees  of  the  Pullman 
Palace  Car  Company  quit  work  in  protest  against  a  reduc- 


PRICES  AND  WAGES  455 

tion  in  wages.     Many  of  the  men  were  members  of  the 
American  Railway  Union,  a  comparatively  new  organiza- 
tion, which  differed  from  the  older  railroad  labor  unions 
in  that  it  accepted  into  membership  railroad  workmen  of 
all  ranks  and  not  only  those  of  a  particular  branch  of  the 
service.     The   American   Railway   Union   championed   the 
cause  of  the  Pullman  employees  and  tried  to  force  the  Pull- 
man Company  to  grant  the  demands  of  its  striking  work- 
men by  ordering  a  "boycott"  of  Pullman  cars;  that  is,  the 
members  of  the  union  were  directed  not  to  assist  in  switch- 
ing or  transporting  Pullman  cars  on  the  railroads.     "When 
members  of  the  union  were  discharged  for  attempting  to 
put  the  boycott  into  effect  the  officers  of  the  organization 
promptly  called  a  strike.     The  chief  center  of  the  strike  was 
Chicago,  where  the  union  was  strongest.     Rioting  started 
soon  after  the  strike  began,  a  number  of  people  were  killed 
and  injured,  and  a  large  quantity  of  railroad  property  was 
destroyed.     The  service  of  the  Chicago  railroads  was  soon 
almost  entirely  suspended.     The  municipal  authorities  were 
unable  to  give  the  protection  needed  to  make  a  restora- 
tin  of  service  possible,  and  the  Governor  of  Illinois  refused 
to  make  effective  use  of  the  power  of  the  State,  or  to  appeal 
to  the  President  for  Federal  aid.     The  Federal  authorities 
soon  intervened  however  without  the  action  of  the  Gov- 
ernor.    On  July  2  a  Federal  judge  issued  a  sweeping  in- 
junction ordering  the  strikers  and  their  leaders  to  desist 
from  obstructing  the  movement  of  the  mails.     The  order  of 
the  court  was  disobeyed  and  President  Cleveland  promptly 
ordered  2,000  Federal  troops  to  Chicago.     In  a  few  days 
order  was  restored,  the  president  and  other  officers  of  the 
American  Railway  Union  were  arrested,  and  the  strike  soon 
collapsed. 

Evils  of  Industrial  Warfare.  The  recurring  struggles 
between  employers  and  wage  earners  caused  great  eco- 
nomic loss.     Some  strikes  were  won  and  some  were  lost, 


456  PRICES  AND  WAGES 

but  whatever  the  outcome  of  a  particular  strike  the  net 
result  was  invariably  a  loss  to  the  nation  as  a  whole.  The 
interruption  of  work  curtailed  the  production  of  wealth, 
the  workers  lost  heavily  because  of  unemployment,  em- 
ployers were  forced  to  forego  their  profits,  and  the  public 
suffered  greatly  from  the  lack  of  goods  and  services  the 
production  of  which  was  suspended.  The  conflicts  bred  a 
spirit  of  bitter  animosity  between  employers  and  employees, 
creating  the  conviction  that  the  two  groups  were  enemies 
without  any  common  interest.  Laborers  came  to  regard 
capitalists  as  being  merely  agents  of  exploitation,  while 
capitalists  came  to  view  labor  organizations  with  distrust 
and  hatred.  The  growth  of  class  antagonism  tended  to 
increase  the  difficulty  of  finding  means  to  promote  indus- 
trial peace. 

The  methods  employed  in  waging  industrial  warfare  were 
such  as  to  further  the  development  of  class  hatred.  The 
strike  and  the  lockout  were  not  the  only  weapons  of  the  op- 
posing groups.  The  boycott  became  a  favorite  instrument 
cf  warfare  of  striking  workmen,  while  employers  collabo- 
rated in  establishing  "blacklists"  of  the  employees  who 
were  inclined  to  take  a  prominent  part  in  labor  disturb- 
ances. Workers  whose  names  appeared  in  a  "blacklist" 
found  it  impossible  to  obtain  employment. 

The  worst  feature  of  the  great  labor  disturbances  of  this 
period  was  that  they  were  almost  invariably  accompanied 
by  criminal  violence.  The  strikers  were  often  misguided 
by  bad  leaders  or  they  were  not  led  at  all.  The  "scabs," 
who  refused  to  strike  with  the  union  laborers  or  who  tried 
to  take  the  jobs  of  the  strikers,  were  hated  intensely,  and 
when  they  refused  to  yield  to  peaceful  persuasion  they 
were  subjected  to  intimidation  and  violence.  Once  disor- 
der was  started  it  seldom  ended  without  the  commission 
of  arson,  burglary  and  murder.  The  stern  suppression  of 
disorderly  outbreaks  by  agents  of  the  law  tended  to  create 


PRICES  AND  WAGES  457 

a  spirit  of  discontent  of  which  professional  agitators  were 
quick  to  take  advantage  to  preach  the  doctrine  of  violent 
resistance  to  the  force?  of  law  and  order.  Industrial  war- 
fare thus  threatened  to  undermine  not  only  the  economic 
welfare  of  the  nation  but  also  its  social  and  political  insti- 
tutions. 

Labor  Legislation;  Restriction  of  Immigration.  One 
beneficial  result  of  labor  disturbances  was  to  make  people 
realize  that  the  problem  of  the  relation  of  capital  and  labor 
should  be  subjected  to  careful  scientific  study.  In  several 
States  special  bureaus  were  created  to  gather  and  publish 
information  concerning  the  conditions  of  labor,  and  on 
many  occasions  special  investigations  of  labor  questions 
were  made  by  State  and  by  Federal  agencies.  It  was  but  a 
short  step  from  investigation  to  legislation.  Laws  were 
passed  to  protect  the  health  of  workers,  to  provide  for  a 
greater  degree  of  safety  in  employment,  to  limit  the  hours 
of  work  of  women  and  of  minor  children,  to  establish  rules 
with  respect  to  the  liability  of  employers  for  injuries  suf- 
fered by  workers.  A  number  of  States  enacted  measures 
to  promote  the  settlement  of  labor  disputes  by  conciliation 
and  arbitration,  and  in  1888,  following  an  investigation  of 
the  railroad  strikes  of  the  two  previous  years.  Congress  en- 
acted a  law  which  was  intended  to  encourage  the  voluntary 
arbitration  of  labor  troubles  on  railroads  engaged  in  inter- 
state commerce.  Several  States  passed  laws  forbidding  the 
use  "with  malicious  intent"  of  the  boycott  and  the  black- 
list. 

One  feature  of  the  legal  phase  of  labor  controversies 
which  was  a  cause  of  much  discontent  was  the  use  of  the 
injunction.  Acts  of  violence  on  the  part  of  strikers  were 
properly  punishable  under  the  law,  though  the  offenders 
had  to  be  arrested  and  formally  tried  after  the  objection- 
able acts  were  committed.  Through  the  use  of  the  injunc- 
tion employers  often  found  it  possible  to  prevent  a  threat- 


458  PRICES  AND  WAGES 

ened  desiruction  of  property.  Judges  would  issue  restrain- 
ing orders,  the  violation  of  which  made  the  offender  guilty 
of  contempt  of  court,  for  which  a  judge  could  order  im- 
prisonment without  the  formality  of  a  jury  trial.  Unfor- 
tunately the  injunction  was  often  made  the  means  of  grave 
abuse  of  the  constitutional  rights  of  striking  workmen. 
Judges  would  issue  "blanket  injunctions"  directed  against 
certain  specific  persons  "and  all  other  persons"  forbidding 
them  to  commit  certain  specified  acts  or  "any  other  act" 
which  might  result  in  the  destruction  of  property  or  the 
disturbance  of  the  peace.  Under  cover  of  such  injunc- 
tions, officers  of  the  law,  controlled  and  directed  by 
employers,  often  made  wholesale  arrests  of  strikers  where 
there  was  no  legitimate  reason  for  such  action.  The  oc- 
currence of  such  acts  of  injustice  aroused  bitter  antagonism 
among  labor  leaders  to  so-called  "government  by  injunc- 
tion." On  one  occasion  a  Federal  judge  issued  an  injunc- 
tion forbidding  a  threatened  strike  by  the  employees  of 
a  railroad  which  was  being  operated  under  a  receivership, 
on  the  grounds  that  the  strike  would  prevent  the  receiver, 
who  was  an  officer  of  the  court,  from  carrying  out  his  duties. 
This  injunction  was  set  aside  by  a  higher  court. 
In  general,  courts  sustained  the  right  of  labor  to  strike, 
holding  that  workingmen  had  the  right  to  use  any  peace- 
ful means  of  improving  their  condition. 

One  method  which  employers  of  labor  used  to  obtain 
low-paid,  unorganized  workmen  was  to  import  them  from 
abroad,  paying  for  their  passage  and  making  contracts  for 
their  services  for  specified  periods.  Such  "contract 
laborers"  and  thousands  of  immigrants  who  came  to  the 
United  States  at  their  own  expense  gravitated  to  manu- 
facturing and  mining  centers,  constituting  a  supply  of 
cheap  labor  which  employers  drew  upon  to  supplant  their 
dissatisfied  workmen.  For  many  years  there  was  no  re- 
striction of  immigration  whatever,  and  in  the  course  of 


PRICES  AND  WAGES  459 

time  the  large  numbers  of  incoming  foreigners,  who  usu- 
ally had  much  lower  standards  of  living  than  the  American 
workmen,  came  to  be  a  positive  menace  to  the  welfare  of 
labor.  On  the  Pacific  coast  in  particular  the  Chinese  im- 
migrants tended  to  destroy  the  standards  of  American  liv- 
ing. The  leaders  of  organized  labor  waged  an  energetic 
campaign  for  the  restriction  of  immigration.  In  1882 
Congress  enacted  a  law  forbidding  for  ten  years  the  admis- 
sion of  Chinese  laborers,  and  in  1892  the  policy  of  exclu- 
sion was  extended  for  another  ten-year  period.  The  Alien 
Contract  Labor  Law,  passed  in  1888,  provided  that  no 
emploj'er  should  encourage  the  immigration  of  foreign 
laborers  by  prepaying  their  passage  or  by  making  contracts 
for  employment. 

Suggested  Remedies  for  Economic  Ills.  What  created 
the  most  unfavorable  impression  upon  students  of  eco- 
nomics during  the  troublous  times  from  1873  to  1897  was 
the  fact  that  in  spite  of  the  great  increase  in  the  wealth 
of  the  nation  there  was  so  much  hardship,  particularly 
among  the  laboring  classes  and  the  farmers.  Why  in  the 
midst  of  such  plenty  was  there  so  much  misery  and  discon- 
tent? The  peculiar  state  of  aflPairs  brought  about  the  sug- 
gestion of  innumerable  economic  "cure-alls."  The  authors 
of  these  panaceas  each  thought  that  his  particular  remedy 
would  correct  the  economic  ills  of  the  United  States  and  of 
the  world.  While  none  of  the  cure-alls  was  adopted  they 
all  indicated  a  lively  desire  on  the  part  of  the  people  for  a 
change  in  the  old  order  of  things,  and  they  unquestionably 
acted  as  an  educative  influence  which  prepared  the  way 
for  substantial  reforms  in  subsequent  years. 

The  theories  of  Karl  Marx,  the  German  socialist,  who 
published  his  famous  work  "Capital"  in  1867,  found  wide 
acceptance  in  many  industrial  centers  of  Europe  and 
America.  IMarx  taught  that  capitalists  were  merely  ex- 
ploiters of  labor  and  that  the  workers  would  obtain  a  just 


460  PRICES  AND  WAGES 

reward  for  their  labor  only  through  the  abolition  of  private 
ownership  of  all  instruments  of  production.  In  the  United 
States  Henry  George  created  a  profound  impression  with 
his  book  "Progress  and  Poverty,"  published  in  1880. 
George  ascribed  the  increase  of  poverty  in  the  midst  of 
plenty  to  private  control  of  the  land,  and  favored  the 
** single  tax,"  or  the  confiscation  of  the  rent  of  land,  as 
the  means  by  which  the  ill-balanced  production  and  dis- 
tribution of  wealth  could  be  corrected.  In  1888  Edward 
Bellamy  published  his  romance,  "Looking  Backward,"  in 
which  he  depicted  a  Utopian  socialistic  State.  This  work 
was  widely  read  and  did  much  to  promote  the  study  and 
discussion  of  socialism. 

Many  people  in  the  United  States  thought  that  the  lack 
of  proper  economic  adjustment  was  due  to  the  want  of 
sufficient  circulating  currency.  The  production  of  goods 
was  outstripping  the  production  of  money,  with  a  con- 
sequent fall  of  prices.  The  Western  grain  farmers  in  par- 
ticular, who  suffered  frequent  losses  from  low  prices,  were 
prone  to  ascribe  their  troubles  to  the  currency  system 
and  they  took  the  lead  in  an  agitation  for  a  plentiful  sup- 
ply of  "cheap  money."  For  a  time  the  agitation  took  the 
form  of  a  campaign  for  inflation  through  the  extensive 
issue  of  legal  tender  paper  currency;  later  the  cheap  money 
advocates  sought  to  bring  about  the  free  coinage  of  silver. 
In  the  late  eighties  a  political  party,  known  as  the  Peo- 
ple's Party  or  the  Populist  Party,  was  founded,  having  for 
the  chief  feature  of  its  program  the  free  and  unlimited 
coinage  of  silver.  It  also  demanded  government  owner- 
ship of  railroads,  an  income  tax  and  postal  savings  banks. 
This  party  acquired  considerable  strength  in  the  West, 
its  candidate  for  president  receiving  a  popular  vote  of  more 
than  a  million  in  1892  and  obtaining  22  electoral  votes  from 
six  different  States. 

One  of  the  most  interesting  manifestations  of  unrest  was 


PRICES  AND  WAGES  461 

"Coxey's  Army"  of  1894.  Like  Wat  Tyler  of  old,  Coxey 
organized  a  body  of  dissatisfied  workmen — the  army  was 
increased  by  the  addition  of  not  a  few  professional  tramps 
or  ''hoboes" — to  march  to  the  seat  of  government  and 
present  a  statement  of  their  wrongs.  It  was  a  petition 
on  foot.  Coxey 's  chief  demand  was  that  the  government 
shoiild  issue  a  half-billion  dollars  in  paper  money  which 
should  be  used  in  hiring  the  unemployed  to  work  on 
highways  and  other  public  works.  The  army  dwindled  to 
less  than  three  hundred  before  it  arrived  in  Washington. 
On  reaching  the  grounds  of  the  Capitol,  Coxey  and  some 
of  his  followers  were  arrested  for  walking  on  the  grass,  and 
the  episode  came  to  a  farcical  end. 

The  Beginning  of  Industrial  Combination.  While  the 
agricultural  and  laboring  classes  made  little  progress  in 
securing  the  adoption  of  extravagant  economic  theories,  the 
producing  capitalists  began  to  find  a  way  to  protect  them- 
selves against  the  losses  brought  about  by  excessive  com- 
petition. The  cause  for  loss  lay  in  the  temporary  produc- 
tion of  too  great  a  supply  of  commodities  or  services  by 
independent,  competing  establishments.  The  obvious  way 
to  prevent  such  loss  was  to  adopt  methods  by  which  supply, 
and  consequently  price,  could  be  controlled.  Control  could 
be  exercised  by  the  combination  of  rival  interests  into  some 
form  of  monopolistic  organization.  With  the  elimination 
of  competition,  production  could  be  arbitrarily  limited  and 
price  cutting  brought  to  an  end. 

While  it  was  evident  that  the  price  of  a  commodity  could 
be  satisfactorily  regulated  through  the  exercise  of  monop- 
oly power,  it  was  no  simple  matter  to  devise  the  organiza- 
tion through  which  competing  interests  could  be  brought 
together.  Single  producers  were  usually  desirous  of  main- 
taining their  identity,  and  when  the  number  of  producers 
in  one  field  was  large  it  was  extremely  difficult  to  secure 
common  action.     It  has  never  been  practicable,  for  instance, 


462  PRICES  AND  WAGES 

for  farmers  to  work  out  agreements  with  respect  to  the  lim- 
itation of  production  and  the  control  of  prices,  though 
efforts  in  this  direction  have  been  made  many  times.  Com- 
bination can  be  accomplished  most  easily  and  effectively 
when  the  number  of  competitors  is  small,  and  it  was  in 
those  lines  of  business  in  which  competition  was  limited 
to  a  relatively  small  group  of  interests  that  the  first  ef- 
fective industrial  combinations  were  organized.  The  most 
important  early  combinations  were  those  in  the  oil,  anthra- 
cite coal,  whiskey  and  sugar  refining  industries  and  in  rail- 
road transportation. 

The  first  attempts  at  business  combination  among  rival 
producers  did  not  meet  with  a  large  measure  of  success  be- 
cause of  the  use  of  faulty  methods.  At  first  the  members  of 
the  combinations  attempted  to  control  prices  merely  by 
making  price  agreements  with  one  another.  It  was  soon 
found  that  this  method  did  not  work  well.  Promises  to 
maintain  prices  were  readily  made  but  they  were  easily 
broken.  On  several  occasions,  during  the  late  sixties  and 
the  early  seventies,  competing  interests  in  the  railroad 
business,  in  the  oil  business,  and  in  the  anthracite  coal  busi- 
ness entered  into  agreements  to  maintain  certain  minimum 
prices,  but  these  early  agreements  were,  almost  without  ex- 
ception, broken,  because  one  or  more  parties  would  see  an 
opportunity  to  secure  much  greater  profits  by  making  large 
sales  at  slightly  reduced  prices.  "When  one  party  to  a 
price  agreement  failed  to  keep  his  word  the  others  were 
driven  to  renew*  the  competitive  struggle.  Since  price 
agreements  could  not  be  enforced  at  law,  combinations 
based  on  such  agreements  always  failed.  It  was  not  long, 
however,  until  methods  were  found  by  which  price  agree- 
ments could  be  maintained.  One  of  the  most  effective  de- 
vices for  the  accomplishment  of  this  purpose  was  the  pool. 

Pools.  The  most  common  form  of  pool  was  an  agree- 
ment among  rival  producers  in  which  each  was  allotted  a 


PRICES  AND  WAGES  463 

certain  percentage  of  the  total  business  to  be  transacted. 
Some  pooling  organizations  provided  for  a  division  of  sell- 
ing territory,  while  others  provided  for  a  division  of  prof- 
its. Whatever  the  actual  form  of  a  particular  pooling 
agreement  the  purpose  of  all  of  them  was  to  maintain 
prices.  In  manufacturing  the  competing  interests  decided 
what  the  total  production  for  a  season  should  be,  and  each 
one  was  given  a  certain  share  of  the  total.  With  limita- 
tion of  supply  minimum  prices  for  the  entire  output  of  an 
industry  could  easily  bq  maintained  and  the  temptation  to 
cut  prices  was  thereby  removed.  In  the  railroad  business 
rates  were  established  and  traffic  divided  among  competing 
lines  on  a  percentage  basis.  Should  one  line  carry  more 
than  its  allotted  share  of  traffic  it  would  give  the  profit  on 
the  excess  business  to  the  line  or  lines  which  did  not  obtain 
a  proper  percentage  of  the  total.  Pooling  agreements 
could  not  be  enforced  at  law,  because  under  llie  common 
law  they  were  contracts  "in  restraint  of  trade"  and  there- 
fore contrary  to  public  interest.  But  while  not  enforceable 
at  law,  for  a  time  they  were  not  in  violation  of  law.  The 
parties  to  a  pooling  agreement  usually  adopted  some 
method  of  exacting  penalties  from  a  member  who  would 
not  abide  by  the  rules  of  the  organization. 

The  formation  of  pools  by  competing  interests  seems  to 
have  started  in  the  early  sixties  with  the  organization  of 
the  manufacturers  of  cordage  and  of  the  Michigan  salt 
producers.  It  was  not  until  during  the  seventies  and 
eighties  however  that  pooling  was  practiced  on  an  exten- 
sive scale.  One  of  the  strongest  of  the  earlier  pools  was 
that  of  the  anthracite  coal  interests,  organized  about  1872. 
The  anthracite  coal  fields  were  controlled  for  the  most  part 
by  seven  concerns:  the  Pennsylvania  Coal  Company,  and 
six  railroads,  the  Philadelphia  and  Reading,  the  Lehigh 
Valley,  the  Central  of  New  Jersey,  the  Delaware,  Lacka- 
wanna and  Western,  the  Delaware  and  Hudson,  and  the 


464  PRICES  AND  WAGES 

Pennsylvania.  During  the  Civil  War  the  price  of  anthra- 
cite was  high  and  the  profits  of  the  business  large.  After 
the  war  ended  production  was  expanded,  competition  was 
active,  and  the  anthracite  interests  derived  little  or  no 
profit  from  their  business.  In  1872  the  competing  interests 
organized  a  combination,  fixing  the  total  amount  of  coal  to 
be  mined  annually  and  allotting  a  certain  percentage  to 
each  competitor.  This  powerful  organization  succeeded  in 
carrying  out  its  purpose,  limiting  the  production  of  coal 
and  establishing  prices  which  yielded  enormous  profits. 
By  establishing  exorbitant  rates  for  transportation,  the 
coal  carrying  roads,  which  also  controlled  the  major  por- 
tion of  the  mining  business,  were  able  to  dictate  terms  to 
the  independent  mining  interests  outside  the  organiza- 
tion. The  anthracite  combination  has  continued  to  exist 
in  one  form  or  another  to  the  present  day,  and  few  monop- 
olies have  ever  exacted  larger  profits  from  the  consuming 
public. 

One  of  the  earliest  pools  in  manufacturing  was  that  of 
the  manufacturers  of  gunpowder  formed  in  1872.  In  1881 
the  whiskey  distillers  in  the  region  north  of  the  Ohio  River 
founded  a  pool  known  as  the  Western  Export  Association, 
and  a  few  years  later  the  Kentucky  distillers  entered  into 
a  pooling  agreement.  The  result  of  the  whiskey  pools  was 
a  marked  stabilization  in  the  price  of  whiskey.  The  more 
important  steel  companies  organized  a  great  steel  rail 
pool  in  1887  to  control  the  price  and  production  of  steel 
rails,  and  in  1894  the  famous  Addyston  Pipe  pool  was  or- 
ganized. Pools  existed  in  the  wall  paper  and  envelope  in- 
dustries and  in  a  number  of  other  manufacturing 
industries. 

The  pool  reached  its  highest  state  of  development  and 
attained  its  largest  measure  of  success  in  railroad  transpor- 
tation. The  railroads  and  .steamship  lines  operating  in 
the  territory  south  of  the  Ohio  and  Potomac  Rivers  and  east 


PRICES  AND  WAGES  465 

of  the  Mississippi  River  formed  the  Southern  Railway  and 
Steamship  Association  in  1875.  The  primary  object  of  this 
organization  was  to  eliminate  rate  wars  among  rival  car- 
riers by  the  division  among  them  of  competitive  traffic.  So 
successful  was  the  association  that  its  founder  and  chief 
executive,  Albert  Fink,  was  invited  North  in  1877  to  or- 
ganize a  similar  association  among  the  trunk  line  railroads. 
Fink  was  instrumental  in  establishing  pooling  associations 
which  brought  to  a  close  the  bitter  rate  wars  of  the  great 
eastern  railroads.  Railway  pools  were  also  organized  in 
the  territory  west  of  the  Mississippi  River.  The  pooling 
carriers  usually  maintained  the  agreed  division  of  competi- 
tive traffic  by  the  use  of  "eveners."  Since  shippers  had  the 
right  to  choose  the  line  by  which  they  desired  to  ship 
their  freight  it  was  not  possible  for  the  railroad  companies 
to  make  an  accurate  division  of  traffic  without  the  use  of 
some  special  device.  Certain  shippers  controlling  large 
amounts  of  traffic  were  induced  to  permit  their  traffic  to  be 
routed  by  the  carriers.  By  a  proper  distribution  of  this 
freight  business  the  carrier  would  maintain  the  allotted 
percentages  of  the  pooling  agreement.  The  shippers  who 
permitted  their  traffic  to  be  thus  divided  were  known  as 
"eveners, "  and  for  their  cooperation  with  the  carriers  they 
received  special  favors  in  the  way  of  preferred  service, 
lower  rates  and  rebates. 

The  Standard  Oil  Company;  Trusts.  Though  the  pool 
was  a  much  more  effective  device  for  restraining  competi- 
tion than  the  simple  price  agreement  it  was  not  always 
satisfactory.  It  was  necessary  to  readjust  the  allotments 
of  business  from  time  to  time,  and  if  the  members  of  the 
organization  did  not  always  receive  as  much  as  they  felt 
themselves  entitled  to,  there  was  no  certain  way  of  pre- 
venting a  dissatisfied  member  from  violating  the  agree- 
ment. Moreover,  the  pool  was  not  adapted  to  all  kinds  of 
business.     In  the  oil  business,  for  instance,  it  was  impossi- 


466  PRICES  AND  WAGES 

ble  to  foretell  what  production  would  be.  The  highly  spec- 
ulative character  of  the  business  constantly  attracted  new 
investors  and  promoters,  making  it  impossible  for  an  ef- 
fective combination  to  be  established.  During  the  late 
sixties  several  voluntary  associations  of  refiners  and  pro- 
ducers attempted  to  restrict  the  output  of  oil  and  control 
prices,  but  they  were  unable  to  accomplish  results  of  a  sub- 
stantial nature.  The  business  became  an  exceedingly  pre- 
carious one  in  which  large  fortunes  were  gained  in  a  few 
weeks  only  to  be  lost  as  quickly  as  won.  When  condi- 
tions were  at  their  worst  John  D.  Rockefeller,  a  Cleve- 
land refiner,  conceived  the  plan  of  combining  the  leading 
refiners  of  Ohio  into  an  organization  which  would  be 
wealthy  and  powerful  enough  to  dominate  the  oil  industry. 
Shortly  before  1870  he  took  into  partnership  his  brother, 
William  Rockefeller,  Stephen  V.  Harkness,  and  Henry  M. 
Flagler.  In  1870  he  induced  Oliver  II.  Payne,  the  head  of 
the  Clark-Payne  interests  of  Cleveland,  and  a  few  other  of 
his  competitors  to  join  forces  with  him,  and  the  Standard 
Oil  Company  of  Ohio  was  organized  with  an  initial  capi- 
talization of  one  million  dollars.  Whatever  has  been  the 
later  history  of  the  Standard  Oil  combination  it  originally 
obtained  the  lead  in  the  oil  industry  through  the  ability, 
skill  and  foresight  of  its  managers  in  organizing  their  forces 
and  in  adopting  a  progressive  policy  in  the  development  of 
their  business.  The  Standard  built  pipe  lines  for  the 
cheaper  transportation  of  oil,  constructed  tanks  in  which 
temporary  excess  supplies  could  be  stored,  employed  expert 
scientists  to  conduct  investigations  which  led  to  the  devel- 
opment of  cheaper  methods  of  refining  and  to  the  discovery 
of  uses  for  by-products,  manufactured  its  own  barrels  and 
cans  on  a  large  scale,  adopted  the  plan  of  selling  oil  directly 
to  consumers,  and  sold  American  lamps  and  lamp-wicks  in 
Europe  to  promote  the  export  of  oil.  The  success  of  the 
Standard  was  even  greater  than  its  founders  had  expected. 


PRICES  AND  WAGES  467 

More  producing  and  refining  companies  were  absorbed  by 
the  organization,  and  by  1880  Rockefeller  and  his  asso- 
ciates had  control  of  considerably  more  than  half  the  re- 
fined oil  output  of  the  United  States. 

To  obviate  the  danger  of  a  disruption  of  the  affiliated 
companies  and  to  form  a  more  compact  organization  the 
Standard  Oil  interests  in  1879  adopted  a  plan  of  combi- 
nation known  as  a  ''trust."  The  shareholders  of  the  af- 
filiated companies  turned  their  stocks  over  to  a  board  of 
trustees,  receiving  "trust  certificates"  entitling  them  to  a 
share  in  the  profits  of  the  combination.  The  management 
of  the  properties  and  the  direction  of  all  the  affairs  of 
the  combination  were  vested  in  the  board  of  trustees,  who 
held  the  stock  and  had  authority  to  vote  it.  This  style 
of  organization  concentrated  the  management  of  the  busi- 
ness and  assured  the  complete  elimination  of  all  competi- 
tion among  the  companies  in  the  "trust." 

The  Standard  now  was  in  a  position  to  wage  a  more  en- 
ergetic warfare  against  its  competitors  than  before.  Act- 
ing as  an  "evener"  for  railroad  combinations  the  Standard 
received  rebates  which  greatly  reduced  its  transportation 
charges.  It  cut  prices  in  the  localities  where  competitors 
endeavored  to  do  business,  and  with  its  great  resources 
was  able  to  outlast  any  rival  in  a  competitive  struggle. 
One  by  one  competing  concerns  were  forced  to  sell  out  to 
the  Rockefeller  interests  or  quit  the  oil  business  altogether. 
The  oil  trust  became  one  of  the  most  powerful  monopolies 
the  United  States  has  ever  known. 

The  "trust"  at  once  commended  itself  as  a  form  of  or- 
ganization admirably  adapted  to  the  purpose  of  those  busi- 
ness interests  which  desired  to  eliminate  competition 
through  combination.  Trusts  wore  organized  to  replace 
many  of  the  previously  formed  pools.  Competing  produc- 
ers who  had  not  found  the  pool  a  suitable  device  for  sup- 
pressing  competition    found   that   they   could    accomplish 


468  PRICES  AND  WAGES 

their  purpose  by  organizing  "trusts."  The  Western  Ex- 
port Association  was  succeeded  by  the  Cattle  Feeders'  and 
Distillers'  Trust  in  1887 ;  the  Sugar  Trust  and  the  National 
Lead  Trust  were  formed  the  same  year.  With  the  devel- 
opment of  the  trust  the  movement  toward  industrial  com- 
bination was  well  under  way. 

The  Holding  Company.  The  trust,  as  a  form  of  busi- 
ness combination,  had  but  a  brief  existence.  A  number  of 
States  enacted  laws  specifically  forbidding  the  organiza- 
tion of  trusts,  and  it  was  necessary  for  the  producers  who 
desired  to  maintain  their  combinations  to  find  another 
means  of  consolidating  their  interests.  The  form  of  or- 
ganization most  widely  employed  after  the  trust  became 
generally  illegal  was  the  "holding  company."  A  holding 
company  was  merely  a  corporation  which  held  shares  in 
other  corporations.  When  it  was  desired  to  combine  com- 
peting corporations  it  was  only  necessary  to  organize  a 
holding  company,  the  shares  of  which  were  given  in  ex- 
change for  the  shares  of  the  corporations  entering  the  com- 
bination. A  great  many  State  courts  and  the  Federal 
courts  took  the  attitude  that  one  corporation  had  no  right 
to  hold  the  stock  of  another  corporation  unless  it  had  ex- 
pressly received  such  power  in  its  charter.  However,  the 
State  of  New  Jersey  amended  its  corporation  laws  in  1889 
so  as  to  permit  the  organization  of  holding  companies,  and 
most  of  the  great  holding  companies  took  out  their  char- 
ters in  that  State. 

When  in  1892  the  Supreme  Court  of  Ohio  held  the  Stand- 
ard Oil  Trust  to  be  an  illegal  combination,  the  Rockefeller 
interests  promptly  organized  the  Standard  Oil  Company  of 
New  Jersey,»to  which  -were  transferred  the  stocks  formerly 
held  by  the  Standard  trustees.  The  combination  was 
thereby  continued  in  an  even  more  effective  form  than 
before.  Other  trusts  adopted  the  same  method  of  pro- 
cedure, so  that  legislation  against  the  trust  form  of  organ- 


PRICES  AND  WAGES  469 

ization  did  little  to  check  the  progress  of  industrial  com- 
bination. 

Government  Regulation  of  Business.  The  development 
of  great  business  combinations  with  power  to  control  the 
supply  and  the  prices  of  many  articles  of  universal  use 
gave  rise  to  a  feeling  of  profound  public  uneasiness.  The 
combinations  frequently  were  guilty  of  grave  abuses  of 
their  power.  They  employed  the  most  ruthless  methods  to 
destroy  small  competitors,  and  once  their  control  of  a  field 
of  industry  was  established  they  frequently  charged  extor- 
tionate prices.  The  railroads  generally  succeeded  in  sup- 
pressing destructive  competition  among  themselves,  but 
they  failed  to  put  an  end  to  the  practice  of  granting  dis- 
criminating rates  and  service  to  favored  shippers  and 
favored  localities.  The  prosperity  of  the  great  combina- 
tions made  them  the  object  of  distrust,  envy  and  suspicion, 
and  in  many  quarters  they  were  held  responsible  for  the 
misfortunes  which  overtook  laborers  and  farmers  and  the 
business  men  who  were  forced  to  meet  strenuous  competi- 
tion. An  aroused  public  demanded  that  legislation  be 
framed  for  the  purpose  of  putting  a  stop  to  the  combina- 
tion movement.  The  problem  of  business  regulation  be- 
came known  as  the  "trust  problem,"  the  name  "trust" 
being  applied  to  all  great  combinations  of  capital,  regard- 
less of  the  fact  that  the  trust,  in  the  strict  sense  of  the 
word,  had  but  a  short-lived  career. 

In  general  it  may  be  said  that  a  government  may  deal 
with  the  problem  of  private  monopoly  in  one  of  two  ways. 
It  may  recognize  the  existence  of  partial  or  complete  mon- 
opoly, permit  it  to  continue,  and  proceed  to  control  the 
monopolized  industry  by  regulating  prices  and  supervis- 
ing services.  Or  it  may  endeavor  to  counteract  any  ten- 
dency toward  monopoly  in  business  by  enacting  laws 
framed  to  insure  free  and  fair  competition.  In  the  United 
States  both  these  methods  were  tried.     In  the  regulation 


470  PRICES  AND  WAGES 

of  the  railroad  business  the  Government  undertook  to  do 
both  things,  regulate  prices  and  enforce  competition ;  in 
the  regulation  of  other  kinds  of  business  the  Government 
merely  endeavored  to  preserve  freedom  of  competition. 
Railroad  corporations  were  subjected  to  more  stringent 
regulation  than  industrial  corporations  because  the  rail- 
road business,  to  a  greater  degree  than  any  other  business 
enterprise,  came  into  close  touch  with  all  the  varied  eco- 
nomic activities  of  the  people.  In  railroad  legislation  the 
public  was  willing  to  go  to  the  length  of  regulating  the 
prices  which  the  carriers  might  charge,  but  in  the  regula- 
tion of  other  kinds  of  business  the  people  were  not  yet 
ready  to  go  so  far  as  to  fix  prices. 

State  governments  took  the  lead  in  enacting  laws  for  the 
regulation  of  private  business.  The  "Granger"  railroad 
legislation  of  the  early  seventies  was  copied  in  a  number 
of  States,  and  in  addition  many  States  enacted  laws  prohib- 
iting the  organization  of  industrial  combinations.  Since 
the  Constitution  authorized  Congress  to  regulate  commerce 
among  the  States,  the  State  legislatures  could  not  effec- 
tively regulate  either  the  railroads  or  the  large  indus- 
trial combinations,  much  of  whose  business  was  of  an  in- 
terstate character.  An  urgent  demand  arose  that  Congress 
take  steps  to  do  what  State  legislation  could  not  accomplish. 
In  response  to  these  demands  Congress  somewhat  hesi- 
tantly began  to  pass  laws  for  the  regulation  of  private 
business.  The  enactment  of  such  measures  marked  a  new 
departure  in  the  political  and  economic  history  of  the 
nation.  In  1887  and  in  1890  two  highly  important  laws 
were  passed,  important  not  so  much  for  what  they  accom- 
plished as  for  the  fact  that  they  were  the  beginning  of  a 
new  phase  of  governmental  activity.  The  first  of  these 
laws  was  the  ''Act  to  Regulate  Commerce,"  usually  called 
the  Interstate  Commerce  Act.  It  applied  specifically  to 
the  railroad  business.     The  second  act  was  the  Sherman 


PRICES  AND  WAGES  471 

Antitrust  Law,  which  applied  to  all  business  interstate  in 
character,  including  railroads. 

The  Interstate  Commerce  Act.  This  law  had  two  chief 
purposes:  the  establishment  of  reasonable  rates  for  rail- 
road transportation  and  the  elimination  of  discrimination 
in  railroad  rates  and  services.  It  also  declared  railroad 
pools  illegal.  The  most  important  feature  of  the  law  was 
that  it  created  an  administrative  board,  the  Interstate 
Commerce  Commission,  whose  duty  it  was  to  see  that  the 
terms  of  the  act  were  observed.  The  Commission  was  given 
wide  investigational  powers  and  was  authorized  to  pass 
judgment  upon  the  reasonableness  of  rates  and  to  order 
carriers  to  cease  any  unfair  discrimination.  Shippers  who 
thought  they  were  paying  unreasonable  or  discriminating 
rates  were  to  lay  their  complaints  before  the  Commission. 
Unfortunately  the  law  did  not  provide  that  the  orders  of 
the  Commission  should  be  binding  upon  the  railroads.  It 
stipulated  that  if  a  railroad  failed  to  obey  the  Commission's 
orders  the  Commission  could  resort  to  action  in  the  Federal 
courts  to  secure  compliance. 

The  Sherman  Antitrust  Law.  This  act  declared  illegal 
"any  contract,  combination  in  the  form  of  trust  or  other- 
wise, or  conspiracy,  in  restraint  of  trade  or  commerce 
among  the  several  States,  or  with  foreign  nations,"  and 
provided  a  penalty  of  fine  and  imprisonment  for  any  per- 
son who  should  "monopolize,  or  attempt  to  monopolize,  or 
combine  or  conspire  with  any  other  person  or  persons,  to 
monopolize  any  part  of  the  trade  or  commerce  among  the 
several  States,  or  with  foreign  nations."  No  administra- 
tive commission  was  provided  to  enforce  this  law,  its  en- 
forcement being  left  to  the  Federal  Department  of  Justice 
and  the  courts. 

The  Working-  of  the  New  Laws.  Both  these  early  laws 
for  the  regulation  of  private  business  were  based  upon  the 
principle  that  free  competition  should  prevail  in  all  busi- 


472  PRICES  AND  WAGES 

ness  activity,  but  neither  of  the  laws  did  much  to  pro- 
mote the  return  of  free  competition.  The  anti-pooling 
clause  of  the  Interstate  Commerce  Act  was  observed,  and 
railroad  pools  passed  out  of  existence,  but  competition 
among  the  railroads  was  restored  for  only  a  brief  period. 
The  losses  from  rate  wars  made  cooperation  necessary  if 
the  railroads  were  to  avoid  bankruptcy.  The  process  of 
consolidation  of  competing  lines,  which  had  been  going 
steadily  along  for  two  decades,  continued  at  a  more  rapid 
rate,  and  in  most  of  the  regions  where  consolidation  was 
not  possible,  the  carriers  organized  traffic  associations,  the 
officers  of  which  were  authorized  to  establish  rates  on  com- 
petitive traffic.  Severe  penalties,  the  payment  of  which 
was  guaranteed  by  deposits,  were  imposed  upon  any  car- 
rier which  failed  to  observe  established  rates. 

What  was  much  more  serious  than  the  failure  of  the  In- 
terstate Commerce  Act  to  put  an  end  to  rate  agreements 
among  railroads  was  its  failure  as  an  effective  means  of 
putting  an  end  to  unjustly  discriminating  and  unreason- 
ably high  railroad  rates.  The  failure  of  the  statute  to  ac- 
complish these  ends  was  due  to  faulty  wording,  rather  than 
to  lack  of  purpose  on  the  part  of  Congress.  It  was  appar- 
ently thought  by  the  framers  of  the  law  that  the  Interstate 
Commerce  Commission,  when  it  found  particular  rates 
to  be  unreasonable,  could  name  reasonable  rates  which  the 
carriers  should  observe.  The  Supreme  Court  declared 
that  the  Commission  had  no  authority  to  name  reasonable 
rates  because  the  statute  did  not  expressly  give  it  such 
power.  The  interpretation  which  the  Court  placed  upon 
the  language  of  the  law  was  such  that  the  Commission  also 
found  itself  virtually  powerless  to  correct  discriminations 
between  persons,  places  and  commodities.  As  a  corrective 
measure  the  act  proved  to  be  a  total  failure,  and  the  rail- 
road corporations  wilfully  persisted  in  the  improper 
practices  which  had  caused  the  law  to  be  enacted.     About 


PRICES  AND  WAGES  473 

the  only  benefit  derived  from  the  law  was  educational;  its 
weaknesses  showed  the  way  to  effective  regulation.  The 
complete  revision  of  the  statute  was  delayed,  however,  un- 
til 1906. 

The  interpretation  which  the  Supreme  Court  first  placed 
upon  the  Sherman  Antitrust  Act  was  likewise  such  as  to  in- 
dicate that  it  would  prove  to  be  of  little  use  in  putting 
an  end  to  combination  in  restraint  of  trade.  The  first  im- 
portant case  to  reach  the  Supreme  Court  under  the  law  was 
the  Sugar  Trust  case,  or  the  E.  C.  Knight  case,  as  it  is  usu- 
ally called.  The  American  Sugar  Refining  Company,  in 
pursuance  of  its  policy  of  obtaining  a  monopoly  of  the 
sugar  refining  business,  bought  up  four  Philadelphia  re- 
fineries, which  were  its  leading  competitors,  thereby  secur- 
ing control  of  about  98  per  cent  of  the  sugar  refining  busi- 
ness of  the  United  States.  The  Government,  through  the 
Department  of  Justice,  attacked  the  purchase  of  the  com- 
peting refineries  on  the  ground  that  it  was  a  contract  in 
restraint  of  trade  and  therefore  a  violation  of  the  Sherman 
law.  The  Court  held  that  since  the  purchase  of  the  re- 
fineries was  not  an  act  of  interstate  commerce  the  Sherman 
Law  could  not  be  applied  to  the  transaction.  The  Court 
said :  ' '  Contracts  ...  to  control  domestic  enterprise  in 
manufacturing,  agriculture,  mining,  production  in  all  its 
forms,  or  to  raise  or  lower  prices  or  wages,  might  unques- 
tionably tend  to  restrain  external  as  well  as  domestic  trade, 
but  the  restraint  would  be  the  indirect  result,  however  in- 
evitable, and  whatever  its  extent,  and  such  result  would 
not  necessarily  determine  the  object  of  the  contryact." 
Encouraged  by  this  decision,  which  was  rendered  in  1894, 
financiers  interested  in  promoting  industrial  combination 
pursued  their  course  with  redoubled  vigor,  and  the  com- 
bination movement  proceeded  with  great  rapidity.  The 
story  of  the  development  of  this  movement  will  be  given  in 
Chapter  XXIV. 


474  PRICES  AND  WAGES 

The  Panic  of  1893.  The  unsettled  conditions  of  busi- 
ness, due  in  part  to  intensive  competition  and  in  part  to 
unwise  speculation,  finally  culminated  in  1893  in  an  in- 
dustrial and  financial  crisis  of  unusual  severity.  While 
general  economic  conditions  were  in  the  main  responsible 
for  the  crisis,  the  difficulties  of  the  business  world  were 
aggravated  by  the  state  of  the  national  currency.  The 
panic  and  its  effects  will  therefore  be  dealt  with  in  the 
following  chapter,  in  which  the  currency  problem  will  be 
considered. 

Questions  and  Topics 

1.  Analyze  some  phase  of  railroad  or  industrial  compe- 
tition in  your  own  State  showing  whether  the  effects  were 
beneficial  or  otherwise. 

2.  Account  for  the  fact  that  the  wages  of  European 
laborers  are  usually  lower  than  the  wages  of  American 
laborers. 

3.  Give  all  the  arguments  you  can  discover  for  and 
against  the  closed  shop. 

4.  What  bearing  has  immigration  on  the  wage  scale? 

5.  Do  you  think  the  losses  in  wages  and  production  from 
strikes  are  offset  by  the  benefits  derived  by  the  laborers? 
Give  examples. 

6.  Why  is  it  easy  for  the  immigrant  to  succeed  in 
America? 

7.  Is  there  any  relation  between  illiteracy  and  labor 
unrest  ? 

8.  Do  you  approve  of  trade  unions?     Give  reasons. 

9.  If  the  consumer  received  a  product  at  a  lower  price 
under  the  monopolistic  regime  than  under  the  competitive, 
would  that  fact  justify  monopolies? 

10.  Show  in  what  sense  monopolies  tend  toward  govern- 
mental control? 


CHAPTER  XXIII 

CURRENCY  DISORDER  AND  THE  PANIC  OF 

1893 

The  Greenback  Problem.  Tlie  difficulties  which  the  peo- 
ple of  the  United  States  experienced  with  their  currency 
between  1865  and  1900  had  their  start  with  a  controversy 
over  what  should  be  done  with  the  legal-tender  notes  or 
"greenbacks"  issued  by  the  Government  during  the  Civil 
War.  When  the  war  ended  $400,000,000  of  these  notes 
were  in  circulation,  their  value  in  gold  being  about  67 
cents  on  the  dollar.  The  notes  represented  merely  a  non- 
interest-bearing  loan  contracted  by  the  Government  to  meet 
the  exigencies  of  war,  and  it  was  thought  by  most  peo- 
ple that  with  the  return  of  peace  the  notes  would  be  re- 
deemed with  coin  or  interest-bearing  bonds,  and  gradually 
retired  from  circulation.  In  1805  Hugh  ^leCulloch,  the 
Secretary  of  the  Treasury,  recommended  that  the  notes  be 
retired  as  quickly  as  possible  so  that  specie  payments  might 
be  resumed  in  both  public  and  private  business.  Concur- 
ring in  this  recommendation  Congress  passed  a  bill  in 
April,  1860,  authorizing  the  Secretary  of  the  Treasury  to 
sell  bonds  for  the  purpose  of  retiring  the  greenbacks,  stipu- 
lating however  that  not  more  than  ten  million  dollars 
should  be  retired  within  the  six  months  following  the  pas- 
sage of  the  act  and  not  more  than  four  million  dollars  a 
month  thereafter. 

The  policy  of  retiring  the  legal-tenders,  thus  begun  so 
quickly  and  so  easily,  soon  met  with  intense  opposition. 
There  had  been  virtually  no  metallic  money  in  circulation 

475 


476  THE  PANIC  OF  1893 

in  the  United  States  since  1862,  and  the  ''dollars"  in  which 
nearly  all  prices  were  quoted  and  in  which  debts  had  been 
contracted  were  the  depreciated  paper  dollars.  If  the 
Government  should  continue  its  policy  of  redemption  the 
greenbacks  would  rise  in  value  until  they  became  the  equiv- 
alent of  gold.  The  rise  in  the  value  of  the  dollars  would 
be  reflected  in  the  decrease  of  prices.  The  redemption 
policy  would  bear  with  peculiar  hardship  upon  all  debtors 
because  they  would  be  compelled  to  pay  their  debts  with' 
dollars  of  much  greater  purchasing  power  than  "dollars" 
possessed  when  the  debts  were  contracted.  A  lively  agita- 
tion was  begun  to  stop  tiie  retirement  of  the  legal-tenders, 
with  the  result  that  Congress  enacted  a  law  in  February 
1868  prohibiting  any  further  redemption.  During  the 
panic  of  1873,  in  order  to  relieve  the  acute  currency  strin- 
gency in  New  York  and  elsewhere,  the  Secretary  of  the 
Treasury  reissued  $26,000,000  of  the  notes  that  had  been 
redeemed. 

The  hard  times  which  came  with  the  panic  of  1873  were 
attributed  in  many  quarters  to  a  shortage  of  money.  Peo- 
ple had  seen  prices  rise  with  an  inflation  of  the  currency 
and  had  seen  them  fall  when  the  currency  was  contracted. 
Consequently  there  was  a  widespread  belief  that  the  con- 
traction of  the  currency  was  the  sole  cause  of  price  fluctua- 
tions. The  way  to  keep  prices  up  was  for  the  government 
to  issue  more  money.  Most  of  the  "inflationists"  believed 
that  the  Government  could  convert  a  piece  of  paper  into 
money  merely  by  declaring  it  a  legal-tender.  Notwith- 
standing the  lesson  of  the  experiences  of  the  American  peo- 
ple during  colonial  times  and  during  the  Revolutionary 
War,  to  say  nothing  of  the  more  recent  experience  with  the 
greenbacks,  they  did  not  understand  that  the  value  of  gov- 
ernment paper  money  depends  solely  upon  the  ability  and 
willingness  of  the  issuing  government  to  redeem  it  in  metal- 
lic money.     They  urged  that  since  the  greenbacks  were 


THE  PANIC  OF  1893  477 

money  no  effort  should  be  made  to  redeem  them,  and  they 
also  thought  that  the  Government  should  pay  off  its  inter- 
est-bearing bonds  with  further  issues  of  legal-tender  notes. 
The  sentiment  for  enlarging  the  quantity  of  irredeemable 
paper  currency  became  so  strong  that  in  February  1874,  the 
Republican  Congress  passed  an  "inflation  bill"  which  pro- 
vided that  the  amount  of  greenbacks  outstanding  should 
be  increased  to  a  maximum  of  $400,000,000,  The  bill  con- 
tained no  provision  whatever  for  the  redemption  of  the 
notes.  Fortunately  President  Grant  vetoed  the  bill,  and 
all  that  the  inflationists  succeeded  in  accomplishing  for  the 
time  being  was  to  enact  a  law  fixing  the  maximum  amount 
of  legal-tenders  at  $382,000,000,  which  was  the  amount 
then  in  circulation. 

Resumption  Legislation.  The  elections  in  the  fall  of 
1874  went  strongly  against  the  Republicans.  The  Congress 
which  had  passed  the  "inflation  bill,"  having  still  a  few 
months  to  serve  after  the  election,  executed  a  somewhat 
surprising  about-face  movement  and  enacted  a  measure  in 
January,  1875,  for  the  resumption  of  specie  payments. 
This  law,  though  faulty,  was  a  step  in  the  right  direction. 
It  removed  certain  restrictions  upon  the  power  of  national 
banks  to  issue  bank-notes,  and  in  view  of  a  probable  in- 
crease of  bank-note  currency,  directed  the  Secretary  of  the 
Treasury  to  redeem  greenbacks  to  the  amount  of  80  per 
cent  of  whatever  new  bank-notes  might  be  issued  until  the 
total  amount  of  greenbacks  outstanding  declined  to  $300,- 
000,000.  It  provided  further  that  on  and  after  January  1, 
1879,  the  Secretary'  of  the  Treasury  should  "redeem  in  coin 
the  United  States  legal-tender  notes  then  outstanding, 
on  their  presentation  for  redemption  at  the  office  of  the 
assistant  treasurer  of  the  United  States  in  the  City 
of  New  York,  in  sums  of  not  less  than  fifty  dollars." 
The  law  did  not  specify  whether  the  notes  redeemed  "on 
and  after  January  1,  1879,"  should  be  canceled  and  re- 


478  THE  PANIC  OF  1893 

tired,  or  reissued.  The  Secretary  of  the  Treasury  was  au- 
thorized to  sell  bonds  to  obtain  the  coin  necessary  for 
redemption  purposes. 

The  Resumption  Act  met  with  a  great  deal  of  disap- 
proval. The  advocates  of  a  legal-tender  paper  currency 
were  numerous  enough  to  organize  a  National  Greenback 
Party  which  polled  more  than  a  million  votes  in  the  elec- 
tion of  1878.  The  Democratic  Party  was  opposed  to  the 
Resumption  Act,  though  it  was  not  committed  to  the  ex- 
treme inflation  urged  by  the  "greenbackers. "  In  Novem- 
ber, 1877,  the  Democratic  House  of  Representatives  passed 
a  bill  for  the  repeal  of  the  Resumption  Act,  but  the  meas- 
ure was  rejected  by  the  Senate,  which  was  Republican  by  a 
narrow  majority.  The  following  April  the  House  passed 
a  bill  forbidding  the  cancellation  of  any  more  legal-tenders 
which  might  be  redeemed,  and  providing  that  they  should 
be  reissued  and  made  a  permanent  part  of  the  national 
currency.  This  bill,  which  became  a  law  ]\Iay  31,  1878, 
cleared  up  whatever  doubt  existed  as  to  what  should  be 
done  with  the  greenbacks  redeemed  under  the  provisions  of 
the  Resumption  Act.  At  the  time  the  amount  of  legal-ten- 
ders in  circulation  was  .$346,681,616.  The.se  notes  still  re- 
main a  part  of  the  circulating  medium  of  the  country. 

Defects  of  the  Resumption  Legislation.  The  chief  de- 
fect of  the  resumption  legislation  was  that  it  did  not  con- 
tain any  provision  which  assured  beyond  doubt  that  the 
Treasury  would  always  redeem  the  legal  tender  notes  on 
demand.  Should  the  Treasury  at  any  time  fail  to  give 
coin  in  exchange  for  its  paper  obligations  they  would  at 
once  depreciate  in  value  and  the  currency  would  lapse  into 
a  disordered  state  similar  to  that  which  existed  from  1862 
to  1879.  If  the  Resumption  Act  had  directed  the  Secre- 
tary of  the  Treasury  to  accumulate  a  special  redemption 
fund  equal  in  amount  to  the  total  quantity  of  greenbacks 
outstanding  and  had  provided  that  redeemed  legal  tenders 


THE  PANIC  OF  1893  479 

should  be  reissued  only  upon  the  restoration  to  the  re- 
demption fund  of  amount  of  coin  equal  to  the  reissued  notes 
the  Treasury  would  have  been  safe  at  all  times.  The  adop- 
tion of  such  a  plan  however  would  have  been  equivalent  to 
the  retirement  and  cancellation  of  the  greenbacks,  and  this 
the  inflationists  would  not  permit. 

The  resumption  legislation  did  not  provide  for  any 
special  redemption  fund.  It  merely  authorized  the  Secre- 
tary of  the  Treasury  to  sell  bonds  to  obtain  the  coin  needed 
for  redemption  purposes.  John  Sherman,  who  was  the  Sec- 
retary of  the  Treasury  at  the  time  specie  payments  were 
resumed,  thought  that  the  Treasury  should  have  a  surplus 
of  at  least  forty  per  cent  of  the  amount  of  greenbacks  in 
circulation,  and  he  accordingly  sold  bonds  sufficient  to 
obtain  $95,500,000  in  gold,  in  addition  to  which  the  Treas- 
ury held  some  $20,000,000  in  gold  derived  from  customs  re- 
ceipts. An  act  passed  by  Congress  in  1882  directed  the 
Secretary  of  the  Treasury  to  suspend  the  issue  of  gold  cer- 
tificates "whenever  the  amount  of  gold  coin  and  gold 
bullion  in  the  Treasury  reserved  for  the  redemption  of 
United  States  notes  falls  below  one  hundred  millions  of 
dollars."  This  act  recognized  the  existence  of  a  reserve 
though  no  positive  provision  for  one  had  been  made.  This 
law  also  recognized  the  obligation  of  the  Treasury  to  re- 
deem the  legal-tenders  in  gold,  though  the  Resumption  Act 
merely  stipulated  that  they  should  be  redeemed  "in  coin." 
The  reserve  was  not  a  special  fund  1o  be  used  only  for  re- 
deeming the  notes.  It  was  a  part  of  the  total  Treasury 
funds,  and  could  be  used,  when  necessary,  to  defray  the 
ordinary  expenses  of  the  Government.  Thus  a  deficiency 
of  Government  revenues  might  endanger  tlie  integrity  of 
the  "reserve"  just  as  much  as  heavy  demands  for  gold 
from  holders  of  the  legal-tender  notes. 

Though    the   retention    of   the    greenbacks   undoubtedly 
weakened  the  currency,  a  Treasury  crisis  might  never  have 


480  THE  PANIC  OF  1893 

occurred  had  the  greenbacks  been  the  only  disturbing  factor 
with  which  the  Treasury  was  forced  to  contend.  Unfor- 
tunately however,  Congress  complicated  the  problem  and 
made  the  burden  of  the  Treasury  much  greater  by  the  en- 
actment of  legislation  which  greatly  increased  the  supply 
of  "cheap  money."  This  legislation  had  to  do  with  the 
coinage  of  silver,  and  it  will  be  necessary  to  make  a  brief 
study  of  the  "silver  question"  in  order  to  understand  how 
the  Treasury  was  finally  overtaken  by  the  financial  crisis 
of  1893. 

The  Adoption  of  the  Gold  Standard.  Until  1873  the 
United  States  had  legally  a  bimetallic  monetary  system. 
The  Government  ofTered  to  coin  freely  and  in  unlimited 
quantities  both  gold  and  silver  at  a  ratio  established  by 
law.  It  has  been  explained  in  a  previous  chapter  how  the 
laws  of  1834  and  1837,  which  established  a  ratio  of  approxi-. 
mately  16  to  1  between  silver  and  gold,  slightly  under- 
valued silver,  thereby  preventing  the  circulation  of  silver 
dollars  and  even  driving  the  subsidiary  silver  coins  from 
circulation  until  their  debasement  in  1853.  Though  several 
million  silver  dollars  were  coined  between  1837  and  1873 
none  of  them  passed  into  domestic  circulation.  Each  dol- 
lar would  pass  only  for  a  dollar  in  domestic  commerce 
while  its  bullion  value  was  about  $1.02.  Whoever  came 
into  possession  of  silver  dollars  melted  them  and  exported 
the  bullion  or  sent  them  to  countries  where  they  were  ac- 
cepted at  their  bullion  value.  For  many  years  therefore, 
the  United  States,  though  nominally  possessing  a  double 
monetary  standard,  had  in  fact  a  single  gold  standard. 
Even  during  the  years  from  1862  to  1879  when  the  paper 
dollar  was  the  standard  of  domestic  exchange  the  value  of 
the  paper  dollar  was  measured  in  gold.  The  premium  on 
gold  merely  represented  the  depreciation  of  the  chief 
circulating  medium  below  the  metal  which  was  the  accepted 
monetary  standard. 


THE  PANIC  OF  1893  481 

The  fluctuations  of  the  ratio  between  silver  and  gold 
have  always  made  it  impracticable  for  a  country  to  main- 
tain permanently  a  bimetallic  standard.  The  money  metal 
which  is  overvalued  becomes  the  standard  in  domestic  ex- 
change, while  the  metal  which  is  worth  more  in  bullion 
than  the  face  value  of  the  coins  made  from  it  is  exported. 
In  April  1870  a  bill  was  introduced  in  the  Senate  pro- 
viding for  the  revision  of  the  coinage  laws.  The  author 
of  the  bill  recognized  that  the  ratio  between  silver  and 
gold  adopted  in  1837  made  the  circulation  of  silver  dol- 
lars impossible,  but  instead  of  altering  the  coinage  ratio 
to  conform  with  the  bullion  ratio  of  the  two  metals  he 
merely  omitted  the  silver  dollar  from  the  list  of  coins 
to  be  minted  under  the  terms  of  the  bill.  In  other  words 
the  bill  provided  that  silver  should  be  demonetized  and 
that  the  monetary  system  of  the  United  States  should  be 
based  upon  the  gold  standard  in  law  as  well  as  in  fact. 
After  being  debated  through  five  sessions  of  Congress  the 
bill  became  a  law  in  February  1873.  It  was  frequently 
charged  in  subsequent  years  that  the  passage  of  the  bill 
was  secured  by  underhanded  methods,  and  the  law  has 
often  been  referred  to  as  the  "crime  of  '73."  There  is 
no  foundation  in  fact  for  the  charge  that  the  bill  was 
passed  through  the  use  of  fraudulent  methods.  The  law 
merely  recognized  a  condition  which  had  existed  for  many 
years.  Very  little  interest  was  displayed  in  the  matter  at 
the  time  the  law  was  passed,  and  no  controversy  would 
have  arisen  had  there  not  been  a  change  in  the  relation 
between  gold  and  silver  bullion. 

The  Decline  of  the  Value  of  Silver.  The  act  for  the 
demonetization  of  silver  had  scarcely  been  passed  when  the 
value  of  silver  bullion  began  to  decline.  The  chief  reason 
for  the  decline  was  a  large  increase  in  the  production  of 
silver  from  newly  discovered  lodes  in  Nevada.  Another 
reason  was  the  demonetization  of  the  metal  by  Germany  in 


482  THE  PANIC  OF  1893 

1871  and  the  limitation  of  its  coinage  by  other  European 
countries.  By  1876  the  value  of  371.25  grains  of  pure 
silver — the  amount  formerly  contained  in  the  American 
silver  dollar — was  only  90  cents  in  gold.  Had  free  coinage 
of  silver  still  existed  it  would  have  been  possible  for  the 
owners  of  silver  bullion  to  have  it  converted  into  coin  hav- 
ing the  same  legal  tender  value  as  gold  coin  of  considerably 
greater  bullion  value.  Under  such  circumstances  gold 
would  have  left  the  country  just  as  silver  had  left  in  former 
years  and  the  domestic  metallic  currency  would  have  con- 
sisted entirely  of  silver. 

The  Silver  Coinage  Act  of  1878.  As  soon  as  the  price 
of  silver  bullion  declined  to  the  point  where  free  coinage 
would  have  been  profitable  for  the  owners  of  silver  the 
Western  silver  mining  interests  began  to  demand  that  the 
bimetallic  standard  be  restored.  They  were  backed  in  their 
demand  by  the  currency  inflationists,  who,  just  defeated  in 
their  plan  for  increasing  the  supply  of  currency  through 
the  issue  of  a  large  quantity  of  greenbacks,  gladly  seized 
upon  the  silver  issue  as  a  means  of  accomplishing  their 
ends.  In  July,  1876,  a  bill  was  introduced  in  the  House 
of  Representatives  to  remonetize  silver.  To  pass  it  at  that 
time  in  the  session  required  a  suspension  of  the  rules  of 
the  House,  for  which  a  two-thirds  vote  was  required. 
Though  the  motion  to  suspend  the  rules  received  a  majority 
vote  it  did  not  receive  the  necessary  two-thirds  and  the 
bill  failed.  The  following  year  an  unlimited  coinage  bill 
was  again  introduced  and  passed  the  House  by  a  vote  of 
16-1  to  34.  In  the  Senate  the  inflationist  sentiment  was 
not  so  strong  and  the  bill  was  amended  to  provide  for  the 
coinage  of  a  limited  amount  of  silver.  As  the  bill  Anally 
passed  both  branches  of  Congress  it  provided  that  the 
Secretary  of  the  Treasury  should  purchase  each  month  not 
less  than  $2,000,000  and  not  more  than  $4,000,000  worth 
of  silver,  which  should  be  coined  into  silver  dollars,  each 


THE  PANIC  OF  1893  483 

containing  371.25  grains  of  pure  silver.  One  section  of  the 
law  permitted  the  holders  of  silver  dollars  to  deposit  them 
in  the  Treasury  and  receive  in  exchange  silver  certificates 
in  denominations  of  not  less  than  $10.  The  silver  dollars 
were  to  be  legal  tender.  President  Hayes  vetoed  the  bill  on 
the  ground  that  the  legal-tender  silver  dollars  would  enable 
debtors  to  pay  their  obligations  entered  into  since  1873 
with  dollars  of  less  value  than  the  dollars  contracted  for 
in  the  obligations,  but  the  bill  was  passed  over  his  veto 
and  became  a  law  February  28,  1878.  The  minimum 
amount  of  silver  was  purchased  under  the  law  each  month 
for  12  years  and  out  of  the  metal  378,166,000  dollars  were 
coined  and  paid  out  by  the  Treasury.  In  1886  the  Secre- 
tary of  the  Treasury  was  authorized  to  issue  silver  certifi- 
cates of  the  denominations  of  $1.00,  $2.00  and  $5.00.  The 
certificates  of  small  denomination  were  much  more  accept- 
able to  people  than  the  heavy  silver  dollars. 

Weakness  of  the  Currency.  Tiie  silver  dollars  coined 
under  the  law  of  1878  added  to  the  burden  placed  upon 
the  Treasury  by  the  greenbacks.  Though  not  legally  bound 
to  maintain  the  gold  standard  by  redeeming  the  legal- 
tender  notes  in  gold  and  by  accepting  silver  and  silver 
certificates  for  gold  the  Treasury  was  forced  to  follow 
such  a  course  if  a  renewed  confusion  of  the  monetary 
system  was  to  be  avoided.  The  paper  and  silver  dollars 
circulated  as  the  equivalent  of  gold  only  because  the 
Treasury  stood  ready  to  give  gold  in  exchange  for  them 
or  accept  them  in  payment  of  taxes  on  a  parity  with  gold. 
Had  the  free  and  unlimited  coinage  of  silver  been  adopted 
the  Treasury  could  not  have  maintained  the  parity  of 
silver  and  gold  while  the  bullion  ratio  between  them  was 
different  from  the  coinage  ratio,  and  with  an  over- 
valuation of  silver  gold  would  soon  have  ceased  to  circu- 
late. But  with  a  limited  coinage  of  silver,  gold  was  not 
driven  from  circulation  so  long  as  the  Treasury  preserved 


484  THE  PANIC  OF  1893 

the  gold  standard.  But  would  it  be  possible  for  the 
Treasury  always  to  maintain  the  gold  standard,  without 
resort  to  extraordinary  measures,  in  view  of  the  fact  that 
the  number  of  silver  dollars  in  the  currency  was  steadily 
being  increased? 

Foreign  Trade  and  the  Currency,  1878-1890.  The 
ability  of  the  Treasury  to  maintain  gold  payments  de- 
pended primarily  upon  the  amount  of  gold  in  the  country. 
As  long  as  the  supply  of  gold  was  stationary  or  increas- 
ing there  would  be  no  occasion  for  a  demand  upon  the 
Treasury  to  give  gold  in  exchange  for  paper  or  silver. 
But  if  anything  occurred  to  cause  the  exportation  of  gold 
the  Treasury  would  certainly  be  asked  to  redeem  its  de- 
mand obligations.  Silver  and  greenbacks  passed  at  their 
face  value  readily  enough  in  domestic  commerce  while  re- 
demption in  gold  was  possible,  but  they  could  not  be  used 
at  their  face  value  in  the  settlement  of  foreign  commercial 
accounts.  "When  individuals  in  the  United  States  desired 
to  make  payments  of  coin  to  foreign  creditors  they  used 
gold.  The  exportation  or  importation  of  gold  was  purely 
a  commercial  matter  depending  upon  the  ebb  and  flow  of 
international  trade.  Just  after  the  war  of  1812  and  just 
before  the  panic  of  18.37  the  American  people  had  become 
involved  in  commercial  and  financial  difficulties  because  the 
condition  of  international  trade  had  caused  a  heavy  drain 
on  the  supply  of  specie.  The  recurrence  of  such  a  drain, 
after  the  weakening  of  the  currency  by  the  greenback  and 
silver  legislation,  was  bound  not  only  to  create  a  disturb- 
ance in  private  business  but  to  involve  the  Federal 
Treasury  in  serious  difficulty. 

To  understand  the  development  of  the  currency  problem 
of  the  United  States  to  the  final  crisis  in  1893  one  must 
follow  closely  the  changes  in  the  foreign  trade  of  the  nation 
after  1879  and  understand  the  influence  of  the  changing 
conditions  of  this  trade.     To  maintain  an  adequate  gold 


THE  PANIC  OF  1893  485 

supply  the  United  States  needed  a  fairly  large  favorable 
balance  of  merchandise  trade,  because  of  being  a  "debtor 
nation."  Foreign  capitalists  invested  large  sums  of  money 
in  American  enterprises,  particularly  in  railroads,  and  a 
normal  excess  of  merchandise  exports  was  necessary  in 
order  that  the  payment  of  interest  on  these  investments 
might  be  met  without  the  exportation  of  gold.  Moreover, 
the  United  States  having  no  merchant  marine  of  import- 
ance, it  was  necessary  for  American  merchants  to  hire 
foreign  shipowners  to  perform  their  carrying  service.  The 
excess  of  merchandise  exports  in  part  represented  pay- 
ments for  ocean  transportation.  The  purchase  or  sale  of 
American  securities  by  foreigners  also  affected  the  interna- 
tional movement  of  gold.  The  pui'chase  of  large  quantities 
of  American  securities  during  years  of  a  comparatively 
small  American  export  trade  counteracted  the  tendency 
for  gold  to  leave  the  country.  In  other  words  a  temporary 
excess  of  imports  might  merely  represent  foreign  invest- 
ments in  American  enterprises.  On  the  other  hand  if 
foreign  investors  sold  American  securities  the  sales  tended 
to  cause  an  exportation  of  gold,  and  if  the  sales  were  large 
enough  they  might  cause  gold  to  be  exported  even  in  years 
when  the  balance  in  the  merchandise  trade  was  highly 
favorable. 

Perhaps  the  most  important  factor  in  the  situation,  how- 
ever, was  the  condition  of  the  American  export  trade. 
The  import  trade  tended  to  increase  at  a  normal  rate,  fall- 
ing off  in  a  decided  manner  only  in  years  of  extreme  busi- 
ness depression  such  as  1884  and  1893.  On  the  other 
hand  the  export  trade  was  somewhat  unstable.  During 
the  entire  period  from  1879  to  1898  the  character  of  the 
balance  of  trade  depended  largely  upon  the  foreign  sales 
of  American  agricultural  products,  and  particularly  upon 
the  sales  of  wheat,  flour  and  cotton.  The  foreign  demand 
for  American  cotton  was  fairly  regular,  but  production  did 


486  THE  PANIC  OF  1893 

not  always  come  up  to  expectations.  In  the  case  of  wheat 
and  flour  the  foreign  demand  was  highly  elastic.  When 
crops  were  good  in  Europe  American  grain  exports  de- 
clined abruptly ;  when  there  was  a  partial  or  total  failure 
of  European  crops  American  grain  exports  were  larger. 
The  movement  of  gold  in  the  main  depended  upon  the 
movement  of  American  agricultural  exports.  If  these  ex- 
ports were  large  gold  was  imported;  if  relatively  small, 
gold  was  exported.  The  action  of  foreign  capitalists  who 
had  large  investments  in  American  enterprises  occasionally 
counteracted  the  influence  of  large  or  small  agricultural 
exports. 

In  the  following  table  may  be  found  some  selected 
statistics  of  the  foreign  commerce  of  the  United  States  for 
the  20  years  following  1878.  A  study  of  these  statistics 
in  connection  with  the  text  which  follows  will  make  clear 
the  close  relation  between  the  condition  of  foreign  trade 
and  the  development  of  the  currency  problem. 

Statistics  of  Forkigx  Trade  of  Umted  States,  1879-1898. 
(Tn  Millions  of  Dollars) 

Ex))orts    Exports    Exports     Imports 


chnndise 

chandiso 

Aprricuitural 

of 

of 

of 

of 

Exports 

Imports 

Exports 

Wheat 

Flour 

Gold 

Gold 

1879 

710 

445 

557 

130 

29 

4 

5 

1880 

835 

607 

694 

190 

35 

3 

80 

1881 

902 

642 

738 

167 

45 

2 

100 

1882 

750 

724 

.557 

112 

36 

32 

34 

188.3 

823 

723 

626 

119 

54 

11 

17 

1884 

740 

667 

.547 

75 

51 

41 

22 

1885 

742 

577 

554 

72 

52 

8 

26 

1886 

679 

635 

501 

50 

38 

42 

20 

1887 

716 

692 

536 

90 

51 

9 

42 

1888 

695 

723 

505 

56 

54 

18 

43 

1889 

742 

745 

536 

41 

45 

59 

10 

1890 

857 

789 

634 

45 

57 

17 

12 

ISO] 

884 

844 

652 

51 

54 

80 

18 

1802 

1.030 

827 

803 

161 

75 

50 

49 

189.3 

847 

860 

621 

93 

75 

108 

21 

1804 

892 

654 

636 

59 

69 

76 

72 

1805 

807 

731 

558 

43 

51 

66 

36 

ISOfi 

882 

779 

574 

39 

52 

112 

33 

1897 

1 .050 

764 

689 

59 

55 

40 

58 

1898 

1,231 

616 

859 

145 

69 

15 

120 

THE  PANIC  OF  1893  487 

At  the  time  of  a  resumption  of  specie  payments  the  state 
of  foreign  trade  happened  to  be  such  as  to  make  resumption 
a  complete,  though  an  unexpected,  success.  It  has  already 
been  stated  that  the  Treasury  held  more  than  $100,000,000 
in  gold,  most  of  which  had  been  obtained  by  the  sale  of 
bonds.  The  grain  crops  of  the  United  States  both  in  1879 
and  in  1880  were  unusually  good,  while  the  European 
crops  in  both  years  were  far  below  normal.  Heavy  exports 
of  grain  to  Europe  created  a  balance  of  trade  greatly  in 
favor  of  the  United  States.  So  great  was  the  excess  of 
merchandise  exports  over  imports  during  the  two  years 
ending  with  June  30,  1881,  that  $175,000,000  in  gold  was 
imported  into  this  country.  With  a  plentiful  gold  supply 
there  was  no  need  for  a  call  upon  the  Treasury  to  redeem 
the  greenbacks  with  gold. 

It  wanted  only  a  change  in  the  trade  balance,  however, 
to   create   a  demand   upon    the   Treasury   for   gold.     The 
change  began  in  1882.     The  highly  prosperous  fiscal  year 
of  1881  stimulated  the  purchase  of  foreign  goods  to  such 
an  extent  that  the  fiscal  year  of  1882  witnessed  a  new  high 
record  in  the  American  import  trade.     Unfortunately  the 
export  trade  suffered   a  marked   decline.     The   American 
grain  crops  of  1881  were  much  below  normal,  and  while  the 
price  of  wheat  was  high  the  quantity  available  for  export 
was  relatively  small.     The  cotton  crop  too  was  a  partial 
failure  in  1881,  production  for  that  year  falling  more  than 
a  million  bales  below  the  crop  of  the  previous  3'ear.     Ex- 
ports for  the  fiscal  year  of  1882  were  a  quarter  of  a  billion 
dollars  less  than  the  exports  of  1881,  and  with  a  favor- 
able trade  balance  of  only  $26,000,000  the  importation  of 
gold  was  checked.     Foreign  investments  in  American  rail- 
roads maintained  an  equilibrium  of  gold  movements,  and 
for  the  fiscal  year  of  1883  there  was  a  partial  recovery  of 
the  export  trade  which  led  to  a  small  net  gain  in  the  gold 
supply. 


488  THE  PANIC  OF  1893 

In  1883  the  American  crops  of  wheat  and  cotton  were 
again  a  partial  failure,  and  the  exports  of  these  two  staples 
were  much  smaller  during  the  fiscal  year  of  1884  than  they 
had  been  for  some  years.  During  the  latter  part  of  1883 
a  number  of  foreign  capitalists  sold  American  securities  in 
large  amounts.  The  prosperous  years,  1879-1881,  had  led 
to  much  speculative  activity  which  carried  the  prices  of 
railroad  and  industrial  securities  to  higher  levels  than  earn- 
ings really  justified.  Foreigners  sold  their  holdings  at 
high  prices,  taking  a  large  profit  on  their  investment.  The 
reaction  which  usually  follows  undue  speculative  activity 
began  in  the  latter  part  of  1883,  and  the  following  year 
witnessed  a  crisis  in  the  stock  market.  Though  excessive 
speculation  was  the  underlying  cause  of  the  crisis,  panic 
conditions  were  created  by  the  sudden  revelations  of 
enormous  thefts  by  the  officials  of  two  supposedly  strong 
financial  institutions  of  New  York.  Notwithstanding  the 
fact  that  there  was  a  favorable  trade  balance  of  nearly 
$75,000,000  for  the  fiscal  year  of  1884,  liquidation  by 
foreign  investors  caused  a  net  loss  of  gold  amounting  to 
nearly  $20,000,000.  Gold  was  withdrawn  from  the 
Treasury  in  large  amounts  during  the  commercial  crisis, 
and  by  June,  1885,  the  Government's  gold  supply  was  re- 
duced to  $115,000,000,  which  was  dangerously  near  the 
reserve  limit.  The  industrial  depression  which  came  with 
the  crisis  of  1884  caused  a  substantial  decline  in  imports, 
and  while  exports  were  but  slightly  greater  in  1885  than 
in  1884  there  was  nevertheless  a  favorable  trade  balance 
of  $165,000,000,  which  prevented  the  exportation  of  gold. 
During  the  next  year  the  United  States  lost  gold  to  the 
amount  of  $22,000,000. 

By  the  end  of  the  fiscal  year  of  1886,  the  depression  had 
passed.  Business  activity  was  renewed  and  large  amounts 
of  foreign  capital  again  flowed  into  American  industry. 
Though  the  favorable  trade  balance  of  1887  was  compara- 


THE  PANIC  OF  1893  489 

tively  small,  and  the  balance  in  1888  even  against  the 
United  States  to  the  extent  of  .$28,000,000  the  imports  of 
gold  in  both  these  years  were  considerably  in  excess  of  the 
exports.  The  day  of  reckoning  was,  however,  only  post- 
poned. In  1889  the  trade  balance  again  ran  against  the 
United  States  and  the  net  loss  of  gold  amounted  to  $49,- 
000,000. 

The  Treasury  was  favored  during  the  four  years 
following  1885  by  enormous  revenues,  which  not  only 
served  to  pay  the  expenses  of  the  Government  but  enabled 
the  Treasury  to  buy  up  and  cancel  a  large  part  of  the 
bonds  which  represented  the  indebtedness  incurred  during 
the  Civil  War.  Had  these  bonds  not  been  purchased  the 
Treasury  would  have  had  an  excessive  surplus  in  currency, 
which  would  have  been  an  invitation  to  extravagance. 
Fortunately  the  purchase  of  the  bonds  did  not  lead  to  an 
excess  of  the  currency  in  circulation.  Most  of  the  bonds 
were  used  by  national  banks  as  security  for  bank-notes, 
and  as  the  bonds  were  retired  the  bank-notes  which  they 
had  secured  were  canceled.  Had  there  been  a  large  in- 
crease in  the  circulation  as  a  result  of  the  bond  purchases 
speculation  and  extravagance  would  have  been  encouraged, 
foreign  imports  would  probably  have  been  greater  and  the 
outward  movement  of  gold  more  pronounced. 

The  Sherman  Silver  Purchase  Act  of  1890.  In  spite  of 
the  warning  contained  in  a  net  loss  of  $49,000,000  in  gold 
in  1889  the  advocates  of  a  greater  supply  of  currency  per- 
sisted in  urging  the  free  and  unlimited  coinage  of  silver. 
In  1890  a  majority  in  the  Senate  was  in  favor  of  free 
coinage.  While  it  was  not  possible  for  the  inflationists  to 
secure  the  adoption  of  free  coinage  they  were  able  to  get  a 
bill  through  Congress  providing  for  greater  purchases  of 
silver  bullion  by  the  Treasury.  This  bill,  which  became  a 
law  July  14,  1890,  was  known  as  the  Sherman  Silver  Pur- 
chase  Act.     It   provided   that   the   Treasury   should   buy 


490  THE  PANIC  OF  1893 

4,500,000  ounces  of  silver  each  month,  paying  for  it 
with  legal-tender  notes.  These  notes,  like  the  greenbacks, 
were  redeemable  "in  coin,"  either  gold  or  silver,  but  the 
law  declared  it  to  be  the  policy  of  the  United  States  "to 
maintain  the  two  metals  on  a  parity  with  each  other  upon 
the  present  legal  ratio  or  such  ratio  as  may  be  established 
by  law."  During  the  next  three  years  nearly  $156,000,000 
of  these  notes  were  issued.  This  increased  to  $502,000,000 
the  amount  of  legal-tender  notes  which  the  Treasury  was 
bound  to  redeem  in  gold  if  the  gold  standard  was  to  be  pre- 
served. In  addition  to  these  notes  there  were  $378,000,000 
in  silver  dollars  or  silver  certificates,  issued  under  the  act 
of  1878,  which  the  Treasury  was  likewise  obligated  to  ac- 
cept in  exchange  for  gold. 

The  Treasury  Crisis.  For  the  fiscal  year  of  1890  the 
merchandise  exports  of  the  United  States  exceeded  imports 
by  $68,000,000,  and  in  1891  the  excess  was  $39,000,000. 
The  favorable  trade  balance  did  not  serve,  however,  to 
prevent  an  outflow  of  gold.  A  stock  market  crisis  in 
London  in  1890  brought  about  a  general  liquidation  by 
English  capitalists,  and  many  who  had  purchased  Ameri- 
can securities  during  the  four  previous  years  now  threw 
them  on  the  market.  The  result  was  a  net  loss  of  $68,- 
000,000  in  gold  by  the  United  States  during  the  two  years 
ending  with  June  30,  1891.  Only  another  fortunate  acci- 
dent of  nature  intervened  to  save  the  Treasury  from  an 
immediate  crisis.  The  American  wheat  crop  of  1891  was 
the  largest  ever  harvested  up  to  that  time,  while  the 
European  crops,  as  in  1879,  were  far  below  normal. 
Heavy  exports  of  wheat  created  a  favorable  trade  balance 
of  $202,000,000  for  the  fiscal  year  of  1892,  and  the  out- 
ward flow  of  gold  was  for  the  time  being  checked.  The 
unexpected  prosperity  was  followed  by  a  heavy  purchase 
of  foreign  goods,  and  in  1893  there  was  an  adverse  balance 


THE  PANIC  OF  1893  491 

of  trade  of  $18,000,000.     The  same  year  witnessed  a  net 
loss  of  gold  amounting  to  $87,000,000. 

Meanwhile  the  situation  with  respect  to  the  revenues 
and  expenses  of  the  Government  had  been  reversed.  The 
McKinley  Tariff  of  1890,  by  admitting  sugar  free  of  duty 
and  by  imposing  prohibitory  duties  on  many  imports  which 
had  formerly  yielded  considerable  revenue,  brought  about  a 
radical  decrease  in  the  income  of  the  Government,  while 
pension  legislation  and  appropriations  for  public  works 
caused  a  marked  advance  in  expenditures.  In  1890  there 
was  a  surplus  revenue  of  $105,000,000.  During  the  follow- 
ing three  years  income  did  little  more  than  meet  expenses, 
and  early  in  1893,  with  the  expenses  of  the  Government 
still  rising,  it  was  evident  that  a  Treasury  deficit  was  im- 
pending. The  combination  of  circumstances  which  could 
put  the  monetary  system  of  the  United  States  to  the  test 
was  at  hand — a  Treasury  deficit  and  an  adverse  movement 
of  gold  in  international  trade. 

When  President  Harrison's  administration  ended  ]\Iarch 
4,  1893,  the  Treasury  had  barely  the  $100,000,000  gold  re- 
serve fund  with  which  to  meet  public  expenses  and  redeem 
the  outstanding  legal-tender  notes  which  might  be  pre- 
sented. With  the  outflow  of  gold  already  in  progress  it 
was  a  foregone  conclusion  that  the  Treasury  would  be  called 
upon  to  give  up  gold  for  greenbacks.  The  gold  reserve 
must  either  be  maintained  or  specie  payments  suspended. 
Even  before  President  Harrison  left  office  Secretary  of 
the  Treasury  Foster  ordered  the  Bureau  of  Printing  and 
Engraving  to  prepare  plates  for  an  issue  of  bonds  which 
he  intended  selling  to  maintain  the  gold  reserve.  By  mak- 
ing a  direct  appeal  to  some  New  York  bankers  the  Secre- 
tarj'  obtained  enough  gold  in  exeliange  for  notes  to  hold 
the  reserve  fund  intact  until  his  term  of  office  expired. 
The  problem  of  protecting  the   gold  standard   from  the 


492  THE  PANIC  OF  1893 

effects  of  the  mischievous  financial  legislation  of  the  preced- 
ing twenty  years  was  left  to  the  incoming  Cleveland  ad- 
ministration. 

By  the  middle  of  April  the  gold  supply  of  the  Treasury 
had  declined  below  $100,000,000.  This  ominous  event 
caused  a  wave  of  distrust  to  sweep  over  the  holders  of 
American  securities  both  at  home  and  abroad.  The 
Treasury  was  not  legally  bound  to  redeem  the  paper  cur- 
rency in  gold  because  the  law  provided  for  redemption  in 
either  gold  or  silver.  There  was  some  doubt  as  to  whether 
the  Treasury  could  legally  use  any  part  of  the  $100,000,000 
reserve  to  redeem  the  notes  issued  under  the  Sherman 
Silver  Purchase  Act,  inasmuch  as  the  reserve  was  sup- 
posedly to  be  used  only  to  redeem  the  Civil  War  green- 
backs. Suppose  the  Treasury  should  elect  to  redeem  its 
demand  paper  obligations  in  silver?  Debtors  could  al- 
ready settle  their  obligations  in  paper  or  silver  because  they 
were  legal-tender.  If  the  Treasury  did  not  maintain  the 
parity  of  silver  with  gold  any  creditor  would  be  forced  to 
take  in  settlement  of  debts  due  him  "dollars"  which  were 
at  the  time  worth  about  sixty  cents  each  in  gold.  The  fear 
that  the  Treasury  either  would  not  or  could  not  maintain 
the  gold  standard  caused  an  immediate  sale  of  American 
securities  by  investors  both  at  home  and  abroad  in  order 
that  gold  could  be  obtained  while  yet  available. 

The  Commercial  Crisis.  At  this  juncture  matters  were 
made  worse  by  a  severe  industrial  and  commercial  crisis. 
This  crisis  was  due  in  part  to  the  lack  of  confidence  in 
public  credit,  but  its  chief  cause  was  unwise  speculation 
in  railroad  and  industrial  enterprises.  There  had  been 
much  railroad  speculation  throughout  the  eighties,  and 
many  of  the  consolidations  effected  for  the  purpose  of  de- 
stroying competition  had  been  accompanied  by  the  issu- 
ance of  securities  in  extravagant  quantities.  The  Rock 
Island  road  and  the  Louisville  and  Nashville  had  doubled 


THE  PANIC  OF  1893  493 

their  capitalization  in  1880  by  the  issue  of  stock  dividends. 
The  Gould  roads  in  the  Southwest  had  been  loaded  down 
with  liabilities  just  as  the  Erie  had  been  years  before. 
The  managers  of  the  Philadelphia  and  Reading  Railroad 
were  engaged  in  a  bold  speculative  venture  to  build  up  the 
fortunes  of  that  road.  Many  of  the  corporate  reports  of 
supposedly  strong  railroad  systems  had  been  deliberately 
falsified  to  give  the  impression  that  earnings  were  larger 


Grover  Cleveland 

than  they  really  were.  Some  of  the  new  industrial  com- 
binations were  made  the  vehicle  of  extravagant  financing. 
The  National  Cordage  Company  declared  a  dividend  of  100 
per  cent  on  its  common  stock  in  January,  1893,  and  on 
the  first  of  February  paid  its  regular  quarterly  dividends 
on  both  preferred  and  common  stock.  In  May  the  in- 
solvency of  the  company  was  announced  and  a  receiver  ap- 


494  THE  PANIC  OF  1893 

pointed.  Its  shares,  which  in  January  sold  at  147,  dropped 
to  10.  The  Philadelphia  and  Reading,  with  capital  stock 
of  $40,000,000  and  a  bonded  indebtedness  of  $125,000,000, 
had  failed  in  February.  By  paying  dividends  out  of 
capital  and  by  giving  misleading  reports  certain  financiers 
had  been  able  to  give  a  semblance  of  extraordinary  value 
to  securities  which  were  in  fact  worthless.  Stock  specula- 
tion had  been  active  and  as  usual  the  banks  had  supplied 
speculators  with  credit  for  market  operations.  The  failure 
of  the  Reading  and  of  the  National  Cordage  Company 
revealed  the  unstable  nature  of  a  portion  of  the  business 
structure  of  the  country  and  precipitated  a  panic  among 
creditors  of  all  classes.  The  inevitable  liquidation  set  in. 
There  was  insufficient  money  to  make  all  the  payments 
demanded,  and  currency  soon  commanded  a  premium. 
Over  four  hundred  banks  and  trust  companies  failed 
during  the  summer  of  1893  and  74  railroad  corporations 
owning  30,000  miles  of  line  declared  insolvency,  while 
the  number  of  commercial  failures  for  the  year  reached 
the  unprecedented  total  of  15,242,  with  liabilities  of  nearly 
$350,000,000.  The  commercial  and  industrial  crisis  in- 
creased the  demand  for  Treasury  gold,  and  by  checking 
business  enterprise,  caused  a  further  reduction  in  the  al- 
ready deficient  Federal  revenues. 

Repeal  of  the  Sherman  Silver  Purchase  Act.  Presi- 
dent Cleveland  courageously  decided  that  the  gold  standard 
should  be  preserved  whatever  the  cost.  Convinced  that  the 
monetary  crisis  was  due  in  part  at  least  to  the  weaken- 
ing of  the  currency  by  the  purchase  of  silver  bullion  with 
legal-tender  notes  he  issued  a  call  for  a  special  session 
of  Congress  to  meet  on  August  7,  1893,  for  the  purpose 
of  repealing  the  Sherman  Silver  Purchase  Law.  After  a 
long  and  bitter  debate  the  law  was  repealed  on  October 
30,  and  the  compulsory  purchase  of  silver  came  to  an  end. 

The  repeal  of  the  Sherman  Act  could  not  of  itself  save 


THE  PANIC  OF  1893  495 

the  Treasury  from  bankruptcy.  The  outflow  of  gold  was 
bound  to  continue  as  long  as  the  balance  of  international 
payments  ran  against  the  United  States.  And  even  if  con- 
ditions of  trade  and  investment  should  be  reversed  so  as 
to  bring  about  the  importation  of  gold  the  Treasury  could 
not  maintain  a  gold  surplus  for  redemption  purposes 
without  an  increase  in  the  income  of  the  Government.  The 
repeal  of  the  Sherman  Act  did  not  cause  any  change  in 
the  course  of  foreign  trade  and  did  not  bring  any  addi- 
tional funds  into  the  Treasury.  The  payment  of  public 
expenses  in  part  from  the  gold  reserve  had  to  continue, 
and  by  January,  1894,  the  reserve  had  declined  to  $65,- 
000,000.  The  deficit  was  rising  at  the  rate  of  $6,000,000 
a  month,  foretelling  the  complete  exhaustion  of  the 
Treasury. 

The  Sale  of  Bonds.  Under  the  Resumption  Law  of  1875 
the  Secretary  of  the  Treasury  was  authorized  to  sell  bonds 
to  obtain  funds  necessary  to  redeem  legal-tender  notes. 
Availing  himself  of  the  authority  granted  in  this  law 
Secretary  Carlisle,  in  January,  1894,  sold  $50,000,000  of 
5  per  cent  ten  year  bonds,  the  proceeds  of  which  brought 
the  reserve  fund  above  the  $100,000,000  mark.  It  did  not 
remain  there  long.  During  the  acute  stages  of  the  panic 
of  1893  the  premium  on  currency  had  caused  an  importa- 
tion of  gold  in  face  of  what  was  normally  an  adverse  rate 
of  foreign  exchange.  The  business  crisis  checked  the  pur- 
chase of  foreign  goods,  while  exports  advanced  slightly. 
The  favorable  trade  balance  of  $237,000,000  tended  to  re- 
store the  balance  of  international  payments,  and  a  large 
number  of  European  investors,  attracted  by  low  panic 
prices,  bought  considerable  quantities  of  American  securi- 
ties. All  these  influences  operated  to  keep  the  net  loss  of 
gold  down  to  $4,000,000  for  the  fiscal  year  of  1894.  These 
favorable  conditions,  however,  did  not  last  long.  Securi- 
ties having  risen  in  price  under  the  stimulus  of  European 


496  THE  PANIC  OF  1893 

buying,  the  foreign  purchasers  sold  their  holdings  in  order 
to  make  a  quick  profit,  the  trade  balance  declined,  and 
the  export  movement  of  gold  again  became  strong.  By- 
August,  1894,  the  gold  reserve  of  the  Treasury  had  receded 
to  $52,000,000,  and  in  November  Secretary  Carlisle  found 
it  necessary  to  make  an  additional  sale  of  $50,000,000  in 
bonds.  Only  for  a  short  time  was  the  reserve  above  $100,- 
000,000.  The  deficit  in  revenue  continued  and  large 
numbers  of  legal-tenders  were  presented  for  redemption. 
By  February,  1895,  the  reserve  had  fallen  to  $41,000,000, 
and  it  was  dropping  at  a  daily  rate  of  $2,000,000. 

The  assistant  treasurer  in  New  York  warned  Secretary 
Carlisle  that  his  office  could  continue  the  redemption  of 
legal-tender  notes  but  a  few  days.  There  was  not  even 
time  enough  left  to  give  the  two  weeks  public  notice  re- 
quired for  the  sale  of  bonds  by  advertisement.  To  save 
the  Treasury  from  repudiation  of  the  legal-tenders  Presi- 
dent Cleveland  entered  into  an  arrangement  with  a  syndi- 
cate of  New  York  and  London  bankers  to  obtain  $65,000,000 
in  gold.  The  reserve  was  again  built  up,  but  the  with- 
drawal of  gold  was  not  stopped.  The  Wilson  Tariff  Act  of 
1894,  after  its  income  tax  feature  was  declared  unconstitu- 
tional by  the  Supreme  Court,  proved  to  be  but  little  better 
as  a  revenue  producer  than  the  McKinley  Law.  The 
favorable  merchandise  trade  balance  of  $102,000,000  for 
the  fiscal  year  of  1896  was  insufficient  to  offset  foreign 
liquidation,  and  the  net  loss  of  gold  for  the  year  amounted 
to  $78,000,000.  In  January,  1896,  the  Secretary  of  the 
Treasury  advertised  another  sale  of  bonds  to  obtain  gold, 
the  amount  this  time  being  $100,000,000.  The  virtual 
repudiation  of  President  Cleveland  by  the  Democratic 
Party  and  its  adoption  of  a  platform  advocating  the  free 
and  unlimited  coinage  of  silver  at  a  ratio  of  16  to  1  weak- 
ened confidence  in  the  public  credit  still  further,  and  the 


THE  PANIC  OF  1893  497 

exportation  of  gold  continued  until  August,  1896,  when 
the  Treasury's  reserve  again  fell  below  $100,000,000. 

By  this  time,  however,  liquidation  had  run  its  course, 
and  the  heavy  drain  on  the  Treasury  ceased.  Business 
began  to  return  to  a  normal  state  and  the  export  trade 
became  larger.  The  election  of  IMcKinley  to  the  presidency 
in  November,  assuring  the  maintenance  of  the  gold  stand- 
ard, did  much  to  restore  confidence.  Though  the  Treasury 
deficit  continued,  a  favorable  balance  of  trade  for  the  fiscal 
year  of  1897,  amounting  to  $286,000,000,  led  to  a  net  gain 
of  $44,000,000  in  the  nation's  gold  supply.  The  next  year 
exports  were  still  larger,  while  the  high  duties  imposed 
by  the  new  Dingley  Tariff  law  caused  a  radical  reduction 
of  imports.  An  unprecedented  trade  balance  of  $615,- 
000,000,  which  resulted  in  a  net  gain  of  $104,000,000  in 
gold,  signified  that  the  crisis  had  been  safely  passed. 

Currency  Legislation.  On  June  14,  1898,  a  law  was 
enacted  directing  the  coinage  of  the  silver  bullion  pur- 
chased under  the  Sherman  Law  and  ordering  the  retire- 
ment of  the  legal-tender  notes  which  had  been  issued  to 
pay  for  the  bullion.  By  this  law  the  legal-tender  notes  of 
1890  were  gradually  retired  and  their  place  taken  by  silver 
dollars  and  silver  certificates.  On  March  14,  1900,  a  law 
was  passed  to  aid  the  Treasury  in  the  maintenance  of  the 
gold  standard.  This  act  directed  that  all  the  legal-tender 
greenbacks  should  be  redeemed  in  gold  coin  on  demand, 
and  provided  that  a  special  reserve  fund  of  $150,000,000 
should  be  set  aside  in  the  Treasury  to  be  used  solely  for 
redemption  purposes.  None  of  the  money  in  this  fund 
can  be  used  to  meet  the  expenses  of  the  Government,  and 
notes  redeemed  out  of  the  fund  are  to  be  reissued  only 
in  exchange  for  gold.  Should  the  fund  at  any  time  fall 
below  $100,000,000  the  Secretary  of  the  Treasury  must 
sell  bonds  to  bring  it   up   to   $150,000,000.     A   Treasury 


498  THE  PANIC  OF  1893 

deficit  can  no  longer  endanger  the  redemption  fund. 
The  law  of  March  14,  1900,  declared  that  it  should  be  the 
policy  of  the  Secretary  of  the  Treasury  to  maintain  at  a 
parity  of  value  with  the  gold  standard  all  forms  of  money 
issued  by  the  United  States,  but  it  did  not  provide  any 
means  by  which  the  parity  of  silver  dollars  and  silver 
certificates  with  gold  could  be  maintained.  The  failure 
of  the  law  in  this  respect  left  the  silver  an  element  of 
weakness  in  the  national  currency.  However,  the  elimina- 
tion of  the  greenbacks  as  a  possible  source  of  disturbance 
greatly  lessened  the  danger  of  another  Treasury  crisis  such 
as  that  of  1893. 

Questions  and  Topics 

1.  If  our  trade  connections  with  other  countries  were 
severed,  would  our  whole  economic  system  be  crippled? 

2.  Can  you  suggest  any  method  by  which  the  law  of  1900 
might  have  made  silver  an  element  of  strength  instead  of 
weakness  in  our  national  currency? 

3.  Give  a  brief  biography  of  Cleveland  with  emphasis 
upon  his  political  career? 

4.  Describe  the  organization  of  a  bank  with  which  you 
are  familiar,  and  show  how  a  panic  might  ruin  it. 

5.  Show  the  fallacies  in  the  "16  to  1"  arguments  in 
favor  of  silver. 

6.  Describe  previous  events  in  the  economic  history  of 
the  United  States  to  show  that  a  government  cannot  con- 
vert a  piece  of  paper  into  money  merely  by  declaring  it 
legal  tender. 


PART  VII 

INDUSTRIAL  COMBINATION  AND 
GOVERNMENT  REGULATION 


CHAPTER  XXIV 
INDUSTRIAL  COMBINATION 

The  Dingley  Tariff.  The  great  business  interests  of  the 
country,  with  the  exception  of  the  silver  miners  and  the 
farming  interests  of  certain  regions,  rightly  fearing  the 
consequence  of  the  adoption  of  the  monetary  system  pro- 
posed in  the  Democratic  Party  platform  of  1896,  rallied 
to  the  support  of  the  Republican  ticket.  When  President 
McKinley  was  inaugurated  in  March,  1897,  he  at  once 
called  a  special  session  of  Congress.  The  session  was  not 
called,  however,  to  amend  the  currency  laws  nor  to  deal 
with  the  currency  problem  at  all,  but  to  undertake  a  revi- 
sion of  the  tariff.  Notwithstanding  the  fact  that  for  sev- 
eral years  the  policy  of  excessive  protection  had  been 
repudiated  in  national  political  contests  having  the  tariff 
as  the  chief  issue,  the  Republican  Congress  proceeded  to 
frame  a  law  which  will  probably  long  stand  as  the  high- 
water  mark  of  protective  tariff  legislation  in  the  United 
States.  Representatives  of  many  business  interests,  intent 
upon  securing  a  reward  for  their  support  in  the  recent 
political  campaign,  flocked  to  Washington,  demanding  high 
duties  on  virtually  all  imported  articles  which  might  com- 
pete with  the  products  of  American  industries.  In  most 
instances  they  obtained  all  they  demanded,  and  while  it 
was  often  difficult  for  Congress  to  reconcile  the  differences 
of  producers  of  finished  goods  and  producers  of  raw  ma- 
terials, the  tariff  bill,  as  it  finally  passed,  was  highly  satis- 
factory to  all  protected  interests.  High  duties  were  placed 
upon  manufactures  of  cotton,  wool,  silk,  linen  and  leather, 

501 


502  INDUSTRIAL  COMBINATION 

upon  iron  and  steel  products  and  upon  refined  sugar.  Im- 
ported raw  materials,  such  as  hides,  raw  sugar  and  lumber, 
and  the  leading  farm  products  of  the  United  States  also 
received  substantial  protection,  though  in  nearly  all  cases 
proportionately  higher  rates  on  finished  products  gave  the 
manufacturer  a  decided  advantage  over  the  producer  of 
raw  materials.  The  average  of  duties  in  the  new  law  was 
57  per  cent. 

The  Revival  of  the  Combination  Movement.  Secured 
by  the  Dingley  Tariff  Act  from  all  danger  of  effective 
foreign  competition  in  the  domestic  market,  American  capi- 
talists and  business  leaders  attacked  with  renewed  vigor 
the  problem  of  eliminating  competition  among  themselves. 
Considerable  progress  had  been  made  in  organizing  in- 
dustrial combinations  before  the  depression  of  1893,  but 
during  the  hard  times  from  1893  to  1896  many  of  the 
voluntary  agreements  among  competing  establishments  for 
the  maintenance  of  prices  had  broken  down.  The  steel 
rail  pool,  for  example,  had  disintegrated,  and  the  price  of 
steel  rails  had  fallen  from  $30  a  ton  in  1892  to  $18.75  a 
ton  in  1897.  The  wire  nail  pool  had  likewise  been  broken. 
Railroad  competition  had  been  renewed  in  many  regions 
with  the  result  that  rate  systems  had  become  demoralized, 
earnings  of  the  carriers  had  declined,  and  receiverships  had 
been  more  numerous  than  they  probably  would  have  been 
had  the  maintenance  of  rate  agreements  been  possible. 

The  movement  toward  combination  which  set  in  after 
1896  produced  amazing  results.  In  one  industry  after  an- 
other the  stronger  competing  interests  were  brought  to- 
gether and  weaker  competitors  were  absorbed  or  crushed, 
or  if  permitted  to  continue  in  business,  subjected  to  the 
dictation  of  the  combination.  The  pool  and  the  trust  were 
no  longer  extensively  employed  as  agencies  of  consolida- 
tion. The  holding  company  was  the  most  widely  used 
instrumentality  for  combining  rival  concerns  under  unified 


INDUSTRIAL  COMBINATION  503 

management,  but  outright  mergers  of  competing  corpora- 
tions into  single  companies  were  not  uncommon,  and  in 
many  instances  where  combination  by  merger  or  through 
the  organization  of  holding  companies  was  impracticable, 
harmonious  action  of  competitors  was  secured  through  the 
formation  of  "communities  of  interest."  A  community  of 
interest  was  established  by  means  of  interlocking  director- 
ates. Rival  corporations  in  the  same  field  had  a  number 
of  directors  in  common,  so  that  each  concern  had  repre- 
sentation in  the  managing  and  directing  forces  of  its  rivals. 
By  1903  gigantic  corporations  had  obtained  a  dominating 
position  in  a  number  of  important  industries.  The  Ameri- 
can Tobacco  Company  gained  control  of  more  than  three- 
fourths  of  the  manufactured  tobacco  business.  In  the 
meat  packing  industry,  though  the  large  independent  es- 
tablishments did  not  combine  under  a  single  management, 
they  perfected  a  combination,  popularly  known  as  the  Beef 
Trust,  which  eliminated  virtually'  all  competition  in  the 
purchase  of  live  stock  and  in  the  sale  of  meat.  The  Stand- 
ard Oil  Company  gathered  in  more  of  its  smaller  com- 
petitors and  extended  its  control  over  the  oil  business ; 
the  anthracite  coal  combination  waxed  stronger  and  more 
prosperous.  The  International  Harvester  Company,  or- 
ganized in  1902,  was  a  consolidation  of  the  leading  manu- 
facturers of  agricultural  implements.  The  greatest  of  all 
the  industrial  combinations,  the  United  States  Steel  Cor- 
poration, was  launched  in  1901.  Some  of  the  companies 
which  were  constituent  parts  of  this  mammoth  corporation 
were  themselves  combinations  previously  organized  in  cer- 
tain departments  of  the  iron  and  steel  business.  Other 
"trusts"  were  organized  for  the  production  of  flour, 
starch,  copper,  ships,  chewing  gum,  candy,  ice,  matches, 
tin  cans  and  leather.  Great  corporations  were  formed  to 
control  the  public  utilities — gas,  electric  lighting  and 
street  railways — of  large  sections  of  the  country. 


504  INDUSTRIAL  COMBINATION 

Railroad  Combinations.  The  combination  movement 
was  as  strong  in  the  railroad  business  as  in  manufacturing 
and  mining.  An  event  which  tended  to  foster  the  develop- 
ment of  railroad  consolidation  was  the  decision  by  the 
Supreme  Court  in  the  Trans-Missouri  Freight  Association 
case  in  1897.  The  Court  declared  all  formal  rate  agree- 
ments among  railroads,  in  so  far  as  applicable  to  inter- 
state traffic,  to  be  violations  of  the  Sherman  Antitrust  Law. 
Another  decision  of  the  same  character  was  rendered  in 
1898  in  the  Joint  Traffic  Association  case,  the  Court  order- 
ing the  railroad  companies  in  eastern  trunk  line  territory 
to  cease  their  practice  of  making  agreements  with  respect 
to  rates  on  competitive  interstate  traffic.  Fearing  that 
these  decisions  would  bring  about  a  renewal  of  disastrous 
rate  wars,  railroad  managers  throughout  the  country 
turned  to  combination  as  the  only  feasible  means  by  which 
destructive  competition  could  be  prevented.  ^Mergers, 
holding  companies  and  communities  of  interest  became 
common  in  railroad  finance.  It  seemed  for  a  time  that  a 
territorial  consolidation  of  railroads  would  eventually  be 
perfected,  with  all  the  lines  in  each  of  the  great  traffic 
territories  joined  into  a  single  railroad  system. 

The  New  York,  New  Haven  and  Hartford  Railroad  Com- 
pany, under  the  guidance  of  J.  P.  Morgan,  absorbed  nearly 
all  the  transportation  lines  of  New  England,  including 
steam  railroads,  electric  railways  and  steamships.  The 
Pennsylvania  Railroad  Company  purchased  large  blocks  of 
stock  in  two  rival  lines,  the  Baltimore  and  Ohio  and  the 
Chesapeake  and  Ohio.  The  Baltimore  and  Ohio  invested 
heavily  in  the  stock  of  the  Reading  Company,  a  holding 
company  which  owned  all  the  stock  of  the  Philadelphia  and 
Reading  Railroad,  the  leading  carrier  of  anthracite  coal. 
The  Lake  Shore  and  Michigan  Southern  Railroad,  nearly 
all  of  the  stock  of  which  was  owned  by  the  New  York 
Central,  obtained  shares  in  the  Reading  Company  equal 


INDUSTRIAL  COMBINATION  505 

in  amount  to  the  shares  held  by  the  Baltimore  and  Ohio. 
In  this  way  a  community  of  interest  was  established  be- 
tween the  Pennsylvania  Railroad  interests  and  the  Vander- 
bilt  (New  York  Central)  interests.  Other  investments  of 
a  similar  nature  were  made  by  the  great  trunk  line  rail- 
roads, guaranteeing  immunity  from  destructive  competi- 
tive struggles.  In  the  South  the  J.  P.  Morgan  banking  in- 
terests secured  control  of  the  major  portion  of  the  trans- 
portation agencies  east  of  the  Mississippi  River,  the 
Southern  Railway  being  the  central  factor  of  the  system. 
In  the  Northwest  James  J.  Hill  built  up  a  great  system 
of  which  the  most  important  components  were  the  Great 
Northern,  the  Northern  Pacific,  and  the  Chicago,  Burling- 
ton and  Quincy.  In  the  Southwest  the  Gould  interests 
expanded  their  holdings,  and  at  the  same  time  embarked 
on  an  ambitious  venture  for  the  establishment  of  a  trans- 
continental railway  system  extending  from  Baltimore  to 
San  Francisco. 

Of  all  the  promoters  of  railroad  combinations  Edward 
H.  Harriman  was  the  most  daring  and  probably  the  most 
successful.  Starting  in  1897  with  the  acquisition  of  the 
Union  Pacific  Railroad,  which  he  purchased  at  a  fore- 
closure sale,  he  increased  his  railway  holdings  until  at 
the  time  of  his  death  in  1909  he  was  in  undisputed  con- 
trol of  almost  23,000  miles  of  railroad  and  had  an  exten- 
sive financial  interest  in  30,000  miles  more.  It  was  Har- 
riman's  ambition  for  a  time  to  establish  a  complete  trans- 
portation monopoly  in  the  region  west  of  the  Mississippi 
River.  In  1901  he  caused  the  Union  Pacific  to  purchase 
what  was  virtually  a  controlling  interest  in  the  Southern 
Pacific,  and  at  the  same  time  he  endeavored  to  secure  con- 
trol of  the  Northern  Pacific,  which,  jointly'  with  the  Great 
Northern,  a  Hill  property,  controlled  the  Chicago,  Bur- 
lington and  Quincy.  The  Hill  interests,  backed  by  the 
Morgan  banking  house,  strenuously  opposed   Harriman 's 


506  INDUSTRIAL  COMBINATION 

effort  to  dominate  the  Northern  Pacific,  with  the  result  that 
Harriman  tried  to  achieve  his  end  by  the  purchase  of 
Northern  Pacific  stock  in  the  open  market.  A  few  specu- 
lators, unaware  of  the  fact  that  the  bids  for  Northern 
Pacific  stock  represented  the  beginning  of  a  struggle  be- 
tween two  strong  groups  of  financiers,  sold  the  stock  short. 
A  "corner"  was  established,  and  the  unfortunate  short  in- 
terests quickly  bid  the  stock  up  to  $1,000  a  share.  Wall 
Street  witnessed  a  brief  panic.  After  the  flurry  had  sub- 
sided Harriman  was  in  possession  of  a  clear  majority  of  the 
preferred  stock  of  the  coveted  railroad,  while  the  Hill- 
Morgan  group  held  slightly  more  than  one-half  the  common 
stock.  At  the  time  the  preferred  and  the  common  stock 
could  be  voted  on  an  equal  basis,  but  the  preferred 
stock  could  be  retired  on  any  January  1  previous  to  1917. 
This  situation  made  it  advisable  for  the  opposing  forces  to 
compromise,  and  Harriman  reluctantly  abandoned  his 
project  of  obtaining  control  of  the  northern  transcontinen- 
tal lines.  The  immediate  outcome  of  the  contest  was  the 
organization  of  a  holding  company  known  as  the  North- 
ern Securities  Companj-,  the  shares  of  which  were  ex- 
changed for  stocks  of  the  Great  Northern  and  the  Northern 
Pacific  roads.  The  Hill-]Morgan  group  had  a  controlling 
interest  in  the  new  corporation  by  virtue  of  their  large 
holdings  of  Great  Northern  stocks.  In  1904  the  Supreme 
Court  condemned  the  Northern  Securities  Company  as  an 
illegal  device  for  establishing  a  monopoly.  When  its 
assets  were  distributed  the  Harriman  interests  received 
Great  Northern  and  Northern  Pacific  stock,  which  they 
were  able  to  sell  for  $83,000,000  more  than  they  had  origin- 
ally spent  in  the  endeavor  to  purchase  control  of  the  North- 
em  Pacific.  The  proceeds  of  the  sale  were  invested  in  the 
stocks  of  a  number  of  strong  railroads  in  both  the  East  and 
the  West. 

So  rapidly  did  the  consolidation  of  railroad  lines  pro- 


INDUSTRIAL  COMBINATION  507 

eeed  that  by  1903  a  half  dozen  great  New  York  financial 
interests  controlled  nearly  all  the  important  transportation 
lines  of  the  country  and  considerably  more  than  one-half 
the  total  railway  mileage.  The  chief  transportation  agen- 
cy of  the  country  was  monopolized. 

Influence  of  Combinations.  Few  economic  phenomena 
have  given  cause  for  greater  public  concern  than  the  de- 
velopment of  great  business  combinations  during  the  clos- 
ing years  of  the  nineteenth  and  the  early  years  of  the  twen- 
tieth century.  No  other  phase  of  the  economic  history  of 
the  United  States  has  been  marked  by  the  rise  of  more  try- 
ing political  and  economic  problems.  The  primary  pur- 
pose of  the  successful  combinations  was  to  obtain  monopoly 
power  in  the  production  and  sale  of  important  commodi- 
ties of  commerce.  The  attempts  to  establish  monopoly 
control  in  an  industry  were  frequently  attended  with  ser- 
ious abuses,  and  in  virtually  all  cases  where  monopoly 
power  was  partly  or  completely  attained,  the  monopolists 
took  advantage  of  their  position  to  inflict  grave  wrongs 
upon  the  public.  Unfair  methods  of  competition,  polit- 
ical corruption  and  fraudulent  financial  operations  mark- 
ed the  promotion  and  organization  of  monopolistic  com- 
binations, while  some  established  monopolies  increased  their 
profits  by  charging  extortionate  prices  and  by  selling 
goods  of  inferior  quality.  They  aroused  a  bitter  spirit  in 
the  ranks  of  labor  by  the  frequent  oppression  of  employ- 
ees, and  by  wanton  disregard  of  public  welfare  and  brazen 
violation  of  the  law  they  created  a  menacing  feeling  of 
dissatisfaction  and  unrest. 

Unfair  Methods  of  Competition.  In  but  few  instances 
did  large  industrial  corporations  attain  a  dominating  po- 
sition in  their  fields  through  superior  management  and 
exceptional  efficiency.  The  business  of  small  competitors 
was  deliberately  ruined  by  local  price  cutting,  or  by  the 
use  of  "fighting  brands"  of  goods  which  were  put  on  the 


508  INDUSTRIAL  COMBINATION 

market  and  sold  at  a  loss  merely  to  stifle  competition. 
Wholesale  dealers  were  compelled  to  refuse  to  deal  in  pro- 
ducts made  by  competitors  of  the  combinations;  employ- 
ees of  rival  concerns  were  bribed  to  give  information  con- 
cerning the  business  affairs  of  their  employers.  Illegal 
rebates  from  railroads  gave  the  large  combinations  an  un- 
fair advantage  over  smaller  rivals.  Prosecutions  and  in- 
vestigations occurring  during  the  first  decade  of  the  twen- 
tieth century  revealed  the  fact  that  most  of  the  great  bus- 
iness combinations  attained  their  position  of  strength 
through  the  use  of  unfair  tactics.  The  Keystone  Watch 
Case  Company  was  found  guilty  of  forcing  wholesale 
dealers  to  abstain  from  selling  w^atch  cases  made  by  com- 
petitors of  the  Keystone  Company.  The  National  Cash 
Register  Company  pursued  an  avowedly  "knock-out"  pol- 
icy, in  which  nearly  every  known  variety  of  unfair  busi- 
ness dealing  was  employed  to  strangle  competition.  In 
the  earlier  stages  of  its  history  the  International  Harvester 
Company  maintained  bogus  "independent"  concerns  in 
order  to  create  the  impression  that  competition  was  active 
in  the  manufacture  of  agricultural  machinery.  The 
American  Tobacco  Company  adopted  a  similar  practice 
during  the  course  of  its  monopolization  of  the  tobacco  busi- 
ness. In  1907  a  jury  in  the  Federal  Court  of  the  JNorthern 
District  of  Illinois  found  the  Standard  Oil  Company  of 
Indiana,  a  subsidiary  of  the  Standard  Oil  Company  of  New 
Jersey,  guilty  of  accepting  rebates  from  railroads,  in  direct 
violation  of  Federal  law.  Judge  Kenesaw  ^l.  Landis,  who 
presided  at  the  trial,  imposed  a  fine  of  $29,240,000  on  the 
offending  corporation,  but  his  judgment  was  reversed  by 
the  Circuit  Court  of  Appeals  and  the  defendant  company 
acquitted  on  technical  grounds  at  a  subsequent  trial.  In 
other  cases  the  subsidiaries  of  the  "Oil  Trust"  did  not  es- 
cape punishment  however,  and  several  railroad  companies 


INDUSTRIAL  COMBINATION  509 

were  likewise  fined  heavily  for  granting  undue  favors  to  the 
oil  monopoly. 

Political  Oorniption.  Agents  of  ''big  business"  often 
contrived  to  secure  valuable  rights  and  privileges,  as  well 
as  immunity  from  disturbance  by  legal  processes,  by  the 
corrupt  use  of  money.  There  is  scarcely  a  large  city  in  the 
United  States  the  pages  of  whose  history  is  not  stained 
with  a  record  of  notoriously  corrupt  bargains  between 
municipal  authorities  and  agents  of  public  utility  corpor- 
ations, bargains  in  which  valuable  franchises  and  other 
privileges  were  obtained  by  shameless  bribery  and  fraud. 
Contracts  for  street  cleaning,  for  the  construction  of  sew- 
ers, highways  and  public  buildings,  and  for  the  perform- 
ance of  other  kinds  of  public  work  have  been  secured  in 
many  municipalities  by  corrupt  methods.  It  was  for  many 
years  a  common  practice  for  railroad  companies  to  provide 
legislative,  judicial  and  executive  officers — national,  State 
and  local — with  free  passes,  and  unfortunately  it  was  an  all 
too  common  custom  for  public  officials  to  seek  and  accept 
these  favors.  A  number  of  members  of  Congress,  as  well 
as  officials  of  State  and  local  governments,  were  driven 
from  public  life  because  of  the  exposure  of  their  relations 
with  privilege  seeking  corporations,  ]\Iany  corporations 
followed  the  practice  of  contributing  to  the  campaign  funds 
of  both  the  leading  political  parties,  though  usually  corpor- 
ation contributions  went  to  that  party  which  at  the  time 
of  the  campaign  gave  promise  of  being  the  more  generous 
in  bestowing  special  privileges.  In  many  investigations  of 
business  enterprises  evidence  of  corrupt  political  activity 
was  discovered.  The  famous  legislative  investigation  of 
the  insurance  companies  of  New  York,  conducted  by 
Charles  Evans  Hughes  in  1905,  revealed  that  the  directors 
of  the  insurance  companies  spent  huge  sums  of  money, 
which  did  not  belong  to  them,  in  "attempts»to  control  leg- 


510  INDUSTRIAL  COMBINATION 

islation."  The  Interstate  Commerce  Commission  in  its 
report  concerning  the  New  Haven  railroad  monopolj'-  said, 
"To  achieve  such  monopoly  meant  the  reckless  and  scan- 
dalous expenditure  of  money ;  it  meant  the  attempt  to  con- 
trol public  opinion ;  corruption  of  government ;  the  attempt 
to  pervert  the  political  and  economical  instincts  of  the  peo- 
ple in  insolent  defiance  of  law. ' ' 

Financial  Manipulation.  Among  the  most  reprehensible 
practices  of  big  business  interests  during  the  days  when 
combination  activity  was  greatest  were  the  payment  of  ex- 
cessive commissions  to  promotion  agencies,  the  deception 
of  investors  with  false  statements  of  assets  and  earnings, 
the  manipulation  of  securities  and  the  management  of  busi- 
ness operations  in  such  a  way  as  to  enrich  a  few  ' '  insiders ' ' 
at  the  expense  of  other  stockholders,  and  excessive  capitali- 
zation. Many  newly  organized  combinations  paid  heavy 
tribute  in  securities  and  in  cash  to  banking  institutions 
which  acted  as  promoters  and  underwriters.  The  under- 
writers of  the  United  States  Steel  Corporation,  for  example, 
received  preferred  and  common  stock  of  a  par  value  of 
$120,000,000.  The  cash  profit  of  the  underwriters,  after 
all  expenses  were  paid,  was  estimated  by  the  Federal 
Commissioner  of  Corporations  to  be  $62,500,000,  a  most 
exorbitant  commission  in  view  of  the  services  performed 
and  the  risk  assumed.  The  promotion  of  the  United  States 
Shipbuilding  Company  was  one  of  the  most  striking  ex- 
amples of  the  use  of  deception  to  attract  investors.  The 
report  of  the  receiver  of  this  combination,  made  in  1903 — 
so  extravagant  was  the  financial  mismanagement  of  this 
trust  that  it  lasted  scarcely  a  year — showed  that  the  pro- 
spectus issued  by  the  promoters  contained  downright 
falsehoods  with  respect  to  .the  assets  and  earnings  of  the 
companies  entering  the  combination.  The  directors  of  the 
corporation,  in  acquiring  the  properties  of  the  subsidiary 
concerns,  "deliberately  gave  away  many  million  dollars  in 


INDUSTRIAL  COMBINATION  511 

the  stocks  and  bonds  of  the  Company,"  and  likewise  pre- 
sented large  blocks  of  securities  to  individuals  who  partici- 
pated in  the  work  of  organization.  On  numerous  occasions 
the  organization  or  reorganization  of  railroad  and  in- 
dustrial corporations  was  made  the  means  of  augmenting 
the  private  fortunes  of  a  few  directors.  The  devious  meth- 
ods of  "high  finance"  employed  in  the  reorganization  of 
the  Chicago  and  Alton  Railroad  in  1898,  a  reorganization 
by  which  the  capitalization  of  the  road  was  increased  from 
$33,950,000  to  $114,600,000  with  an  addition  of  about 
$18,000,000  to  the  assets  of  the  company,  yielded  a  profit 
of  $24,000,000  to  E.  H.  Harriman  and  his  associates.  The 
investigation  of  the  New  Haven  combination  revealed  meth- 
ods of  corporate  financiering,  the  purpose  of  which  was  the 
enrichment  of  a  few  individuals  who  were  on  intimate 
terms  with  the  management.  The  directors  of  the  St. 
Louis  and  San  Francisco  Railroad  brought  their  company 
to  bankruptcy  by  building  branch  lines  independently  and 
selling  them  at  enormous  profits  to  the  railroad.  The 
Hughes  insurance  investigation  disclosed  the  fact  that  of- 
ficials of  the  great  New  York  insurance  companies  added 
to  their  private  fortunes  by  voting  themselves  enormous 
salaries  and  gratuities  and  by  carrying  out  successful  spec- 
ulations on  their  own  account  with  the  surplus  funds  of  the 
companies  which  they  managed. 

One  of  the  most  persistent  abuses  of  the  combination 
movement  w'as  the  practice  of  capitalizing  newly  organized 
or  reorganized  corporations  for  an  amount  far  in  excess  of 
the  actual  sums  invested.  While  there  may  be  no  direct 
relation  between  capitalization  and  prices  there  can  be 
little  doubt  that  heavily  overcapitalized  organizations,  with 
a  monopoly  control  of  markets,  endeavor  to  justify  exorbi- 
tant charges  on  the  ground  of  having  extensive  capital 
obligations.  Once  the  securities  of  such  organizations  are 
widely  distributed  among  "innocent  investors"  the  insis- 


512}  INDUSTRIAL  COMBINATION 

tence  on  the  need  for  high  prices  is  likely  to  have  con- 
siderable influence  with  the  public.  In  the  past  few  years 
many  public  utility  corporations  have  succeeded  in  obtain- 
ing increased  rates  in  the  face  of  the  fact  that  they  are 
known  to  be  paying  dividends  on  huge  quantities  of 
watered  stock,  and  in  some  cases  the  only  apparent  justi- 
fication for  permitting  increased  rates  has  been  that  long 
ago  the  stock  was  purchased  by  innocent  investors. 

Regardless,  however,  of  the  relation  between  capitaliza- 
tion and  prices,  the  custom  of  overcapitalizing  business  en- 
terprises is  likely  to  have  an  evil  effect.  It  invariably  in- 
vites speculation,  and  it  often  serves  to  conceal  the  real 
earnings  of  a  monopoly,  to  a  knowledge  of  which  the  public 
is  reasonably  entitled.  Perhaps  the  most  pernicious  effect 
of  the  overcapitalization  of  great  business  enterprises  was 
the  encouragement  of  speculation.  A  distinctive  feature 
of  the  organization  of  the  earlier  successful  combinations 
was  the  large  profits  derived  by  the  organizers  from  the 
marketing  of  speculative  securities.  The  mere  process  of 
combination  proved  to  be  a  source  of  large  gains,  the  earn- 
ings from  promotion  and  organization  activities  often  being 
as  large  as  or  larger  than  the  profits  derived  through  the 
elimination  of  competition.  The  result  was  that  combina- 
tions were  promoted  for  no  other  purpose  than  that  of 
speculation  in  new  securities.  Many  unwary  investors,  en- 
ticed by  stories  of  the  large  profits  of  successful  combina- 
tions,were  deceived  by  false  statements  of  prospective  earn- 
ings and  deluded  into  speculation  which  caused  them  to 
suffer  heavy  losses.  The  United  States  Shipbuilding  Com- 
pany and  the  Asphalt  Company  of  America  were  examples 
of  the  most  flagrant  form  of  misdoing  in  the  organization 
of  industrial  combinations. 

Combinations,  Prices  and  Profits.  Inasmuch  as  the 
primary  purpose  of  the  combination  movement,  in  its  early 
stages  at  least,  was  the  suppression  of  competition,  it  was  to 


INDUSTRIAL  COMBINATION  513 

be  expected  that  the  successful  combinations  should  make 
use  of  their  monopoly  power  to  raise  the  prices  of  the  com- 
modities which  they  sold.  The  petroleum,  anthracite  coal, 
beef,  sugar  and  tobacco  monopolies  exacted  prices  which 
yielded  enormous  profits.  Not  only  did  the  combinations 
maintain  higher  prices  on  finished  products,  but  they  kept 
down  the  prices  which  they  paid  for  raw  materials,  adding 
to  their  profits  by  widening  the  margin  between  cost  of 
production  and  sale  price.  The  Beef  Trust  in  particular, 
by  suppressing  competition  in  the  purchase  of  live  stock, 
forced  the  prices  of  hogs  and  cattle  considerably  below 
what  they  would  have  been  had  the  market  been  free  from 
monopoly  influence.  Though  the  trusts  exacted  large  prof- 
its there  were  but  few  cases  in  which  they  charged  extor- 
tionate prices.  For  the  most  part  the  practice  of  monopo- 
lists was  to  stabilize  market  conditions  rather  than  to  push 
prices  to  exorbitant  levels.  They  curtailed  production  and 
kept  prices  up  when  demand  slackened,  and  they  did  not 
advance  prices  unduly  when  the  demand  was  unusually 
active.  For  example  the  price  of  steel  rails  was  maintained 
at  a  constant  level  of  $28  a  ton  from  1902  to  1915,  chiefly 
through  the  influence  of  the  officials  of  the  United  States 
Steel  Corporation,  though  there  was  considerable  fluctua- 
tion in  the  price  of  pig  iron  and  coke,  as  well  as  variations 
in  wages  and  other  factors  entering  into  the  cost  of  pro- 
duction of  steel  rails.  The  International  Harvester  Com- 
pany, with  a  degree  of  monopoly  power  much  greater 
than  that  of  the  United  States  Steel  Corporation,  exercised 
extreme  moderation  in  establishing  prices  upon  farm 
machinery. 

Insatiable  greed  occasionally  led  some  of  the  great  busi- 
ness interests,  as  well  as  many  producers  of  minor  im- 
portance, into  practices  much  more  repugnant  than  finan- 
cial manipulation  and  price  maintenance.  In  1907  it  was 
discovered  that  employees  of  the  Sugar  Trust,  for  a  period 


514  INDUSTRIAL  COMBINATION 

extending  over  at  least  four  years,  had  been  systematically 
robbing  the  Government  of  thousands  of  dollars  in  customs 
revenue  by  tampering  with  the  scales  upon  which  incom- 
ing raw  sugar  was  weighed.  One  of  the  most  shameful 
abuses  brought  to  light  was  the  preparation  and  sale  of 
adulterated  and  otherwise  unwholesome  food  products. 
During  the  Spanish  American  War  the  meat  packers 
sold  diseased  and  tainted  meat  to  the  Government  for  the 
use  of  the  soldiers  and  sailors.  A  subsequent  investiga- 
tion of  the  Western  packing  houses  showed  that  in  vir- 
tually all  of  them  the  most  revolting  unsanitary  conditions 
prevailed.  Diseased  hogs  and  cattle  were  slaughtered,  the 
meat  mixed  with  strong  condiments  and  deleterious  pre- 
servatives, and  sold  to  the  public.  Investigations  of  other 
industries  engaged  in  the  manufacture  of  food  and  drug 
products  revealed  that  adulteration,  misbranding,  and  the 
use  of  poisonous  preservatives  were  all  too  common.  The 
revelations  concerning  the  deceptions  and  frauds  practised 
in  the  food  and  drug  business  constituted  a  national 
scandal. 

Combinations  and  the  Labor  Movement.  A  pronounced 
effect  of  the  combination  movement  in  industry  was  a 
greater  cleavage  between  capital  and  labor.  The  con- 
centration of  large  quantities  of  capital  under  the  mastery 
of  a  few  great  interests  meant  that  the  ultimate  control  of 
many  industries  passed  to  a  relatively  small  number  of  in- 
dividuals who  could  not  come  into  contact  with  the  work- 
men who  served  them.  The  personal,  relation  between 
employer  and  employee  disappeared,  and  the  wage-earner 
became  the  servant  of  an  abstract  property  interest  ra- 
ther than  the  hired  laborer  of  an  individual  capitalist. 
With  competition  checked,  the  strategic  position  of  the 
employing  interests  in  negotiation  with  the  working-classes 
became  much  stronger.  There  was  a  disposition  among 
many  "absentee"  managers  of  industry  to  hold  aloof  from 


INDUSTRIAL  COMBINATION  515 

labor,  assuming  an  attitude  of  autocratic  paternalism  or 
regarding  their  workmen  in  the  same  light  as  they  regarded 
their  machinery.  During  the  anthracite  coal  strike  of 
1902  the  head  of  the  Reading  Company  gave  an  exposition 
of  benevolent  despotism  when  he  wrote,  "The  rights  and 
interests  of  the  laboring  man  will  be  protected  and  cared 
for — not  by  the  labor  agitator,  but  by  the  Christian  men 
and  women  to  whom  God  in  His  infinite  wisdom  has  given 
the  control  of  the  property  interests  of  this  country,  and 
upon  the  successful  management  of  which  so  much 
depends. ' ' 

The  concentration  of  the  interests  of  capital  was  natur- 
ally met  by  a  greater  concentration  of  interest  in  the  ranks 
of  labor.  The  trade-uniion  movement  became  stronger, 
and  the  attitude  of  the  unions  became  in  many  respects 
equally  as  despotic  as  that  of  the  employing  class.  As  in- 
dustrial enterprises  became  greater  in  scope  and  size,  labor 
unions  likewise  became  larger  and  more  powerful.  This 
meant  that  a  strike  or  a  lockout  in  an  industrj^  affected  not 
a  small  segment  of  the  labor  and  capital  employed  in  that 
industry  but  virtually  the  entire  industry.  Thus  it  was 
that  an  industrial  dispute,  instead  of  involving  primarily 
a  relatively  small  group  of  workmen  and  a  few  employers, 
came  to  be  a  matter  in  which  the  public  at  large  was  as 
deeply  concerned  as  the  immediate  parties  to  the  dispute. 
A  protracted  coal  strike  or  steel  strike  or  railroad  strike 
had  a  paralyzing  effect  upon  the  economic  organization 
of  the  whole  country. 

The  accumulation  of  "swollen  fortunes"  which  resulted 
from  the  combination  movement  served  to  strengthen  the 
belief  of  many  people,  particularly  of  large  numbers  of 
workers,  that  labor  was  getting  much  less  than  a  fair  share 
of  the  product  of  industry.  The  inequality  of  distribution 
subjected  the  economic  system  which  permitted  such  in- 
equality to  severe  attacks.     The  chief  manifestation  of  the 


516  INDUSTRIAL  COMBINATION 

demand  for  altering  the  economic  organization  was  the 
growth  of  socialism,  especially  in  the  great  industrial  cen- 
ters of  the  country.  In  the  ranks  of  labor  an  increasing 
number  came  to  believe  that  the  working  class  and  the  em- 
ploying class  had  no  interests  whatever  in  common,  and 
that  workers  could  hope  to  obtain  their  just  deserts  only 
by  the  complete  overthrow  of  the  capitalistic  system. 
Many  workers  who  believed  in  this  policy  of  revolution 
deserted  the  trade-union  movement  as  being  an  ineffective 
method  of  promoting  the  interests  of  labor.  Some  of  the 
revolutionary  leaders  started  in  1905  an  organization 
known  as  the  Industrial  Workers  of  the  World.  Like  the 
Knights  of  Labor  of  former  years,  the  Industrial  Workers 
of  the  World  admitted  workmen  of  all  varieties  of  employ- 
ment. Their  plan  was  to  form  ''one  big  union"  and  their 
object  was  to  initiate  a  "class  struggle"  for  the  abolition 
of  the  wage-system.  To  accomplish  their  purpose  the 
members  of  this  body  favored  the  use  of  "direct  action" — 
the  practice  of  "sabotage"  and  the  use  of  violence.  The 
growth  of  this  organization  and  the  spread  of  its  unwhole- 
some influence  were  ominous  signs  of  an  unhealthy  con- 
dition of  the  industrial  system. 

Big-  Business  and  the  Public.  While  the  great  mass  of 
the  public  did  not  indorse  the  revolutionary  programs  of 
the  socialists  or  the  Industrial  Workers  of  the  World,  there 
was  nevertheless  a  widespread  dissatisfaction  over  the 
abuses  of  "  big  business."  Most  people  quite  correctly 
realized  that  the  entire  business  system  was  not  permeated 
with  corruption  and  dishonesty  but  at  the  same  time  they 
saw  that  it  was  infected  to  a  degree  that  betokened  danger 
if  steps  were  not  taken  to  check  the  activities  of  those  in- 
dividuals in  whom  all  considerations  of  an  ethical  nature 
had  been  suppressed  by  inordinate  greed  and  lust  for 
power.  There  was  not  lacking  a  class  of  conservatives 
who  thought,or  at  least  pretended  to  think,  that  there  were 


INDUSTRIAL  COMBINATION  517 

no  abuses  in  business  which  called  for  corrective  measures 
of  any  description.  Though  numerically  a  small  minority, 
this  group  wielded  an  influence  utterly  disproportionate 
to  its  numbers.  It  took  a  virile  and  resourceful  leader, 
backed  by  an  overwhelming  public  sentiment,  to  set  in 
motion  a  wave  of  reform. 

Questions  and  Topics 

1.  Why  IS  it  said  that  there  is  no  direct  relation  between 
the  capitalization  of  business  corporations  and  prices? 

2.  What  influence  might  induce  the  managers  of  a  trust 
to  charge  lower  prices  than  they  might  obtain  ? 

3.  Does  exceptional  merit  of  individual  employees  gain 
quicker  and  more  adequate  recognition  in  a  large  business 
establishment  than  in  a  small  one? 

4.  Do  you  know  of  any  agreements  among  rival  pro- 
ducers to  control  prices? 

5.  How  might  a  high  protective  tariff  make  industrial 
combination  easier? 

6.  What  has  been  the  effect  of  the  progress  of  industrial 
combination  upon  the  development  of  the  labor  problem  ? 


CHAPTER  XXV 
GOVERNMENT  REGULATION  OF  BUSINESS 

The  Industrial  Commission.  The  McKinley  administra- 
tion seemed  disposed  to  adopt  a  somewhat  complacent 
attitude  toward  the  problems  arising  in  connection  with 
the  growth  of  "big  business."  The  return  of  general 
prosperity  and  the  wonderful  growth  of  business  tended 
to  blind  the  nation  to  the  fact  that  the  industrial  system 
had  faults  which  needed  correction.  Then,  too,  there  was 
a  belief  in  many  quarters  that  the  "trusts,"  whatever 
their  abuses,  had  on  the  whole  a  beneficent  influence  on 
public  welfare.  Engrossed  with  the  problems  connected 
with  the  prosecution  of  the  war  with  Spain,  Congress  gave 
little  heed  to  the  rising  demand  that  private  business  be 
subjected  to  more  stringent  regulation.  Its  only  conces- 
sion of  importance  was  the  enactment  of  a  law  in  June, 
1898,  creating  an  Industrial  Commission,  consisting  of  five 
Senators,  five  Representatives  and  nine  other  members, 
which  was  directed  to  investigate  "questions  pertaining 
to  immigration,  to  labor,  to  agriculture,  to  manufacturing 
and  to  business"  and  to  suggest  in  its  report  to  Congress 
whatever  legislative  measures  it  might  deem  appropriate. 

The  Industrial  Commission  conducted  its  work  of  in- 
vestigation for  a  period  of  four  years.  It  employed  a 
large  number  of  individuals  who  had  expert  knowledge 
of  the  various  fields  in  which  the  Commission  pursued  its 
inquiries.  With  the  aid  of  this  body  of  experts  the  Com- 
mission collected  a  fund  of  highly  valuable  information. 
Its  reports,  published  between  1900  and  1902,  constitute  a 
rich  storehouse  of  material  concerning  the  more  important 

518 


GOVERNMENT  REGULATION  519 

features  of  the  economic  development  of  the  nation  during 
the  latter  part  of  the  nineteenth  century.  A  great  deal  of 
the  report  was  devoted  to  the  problem  of  business  com- 
bination. The  Commission  recommended  the  enactment 
of  State  and  Federal  laws  which  would  tend  to  prevent  in- 
dividuals from  embarking  on  fraudulent  schemes  of  corpo- 
rate promotion ;  it  condemned  in  vigorous  language  all  un- 
fair means  of  competition,  including  local  price-cutting 
and  the  "vicious  practice  of  discriminating  between  cus- 
tomers," and  urged  that  steps  be  taken  to  put  an  end  to 
the  excessive  overcapitalization  of  business  corporations. 
It  pointed  out  that  the  Interstate  Commerce  Act  of  1887 
had  been  wholly  ineffective  in  correcting  transportation 
abuses,  presenting  a  formidable  mass  of  testimony  to  show 
that  the  railroad  corporations  still  made  a  practice  of  dis- 
criminating in  a  grossly  unfair  manner  between  shippers 
and  communities,  and  advised  that  a  law  be  speedily 
passed  to  prevent  the  carriers  from  following  unfair  and 
unscrupulous  methods.  It  took  an  advanced  stand  on  the 
question  of  labor  legislation,  suggesting  the  enactment  of 
laws  to  put  an  end  to  child  labor,  to  regulate  the  hours  of 
employment  of  minors  and  women,  and  to  improve  geu' 
erally  the  working  conditions  of  all  wage  earners. 

President  Roosevelt  and  the  Trust  Problem.  The  re- 
port of  the  Industrial  Commission  strengthened  the  de- 
mand that  Congress  undertake  in  a  serious  manner  the 
regulation  of  business.  When  Theodore  Roosevelt  assumed 
the  presidency  in  September,1901,  the  trust  problem  was 
beyond  question  the  most  important  economic  and  political 
problem  in  the  United  States.  No  one  realized  the  pressing 
nature  of  this  problem  more  keenly  than  President  Roose- 
velt himself.  No  feature  of  his  seven  and  a  half  years  in 
the  presidency  stands  out  more  strongly  than  his  resolute 
efforts  to  solve  this  problem.  The  apostle  of  the  "square 
deal,"  he  waged   relentless  war  on  corruption   and  dis- 


520  GOVERNMENT  REGULATION 

honesty  in  private  business  and  in  public  business,  striving 
not  only  to  secure  progressive  legislation,  but  what  was 
more  important,  stirring  the  conscience  of  the  people  to  a 
realization  of  the  economic  and  social  ills  which  endangered 
national  welfare.  Speaking  at  Harrisburg,  Pennsylvania 
in  October,  1906,  he  said,  "We  need  to  check  the  forces  of 
greed,  to  insure  just  treatment  alike  of  capital  and  of  labor 
and  of  the  general  public,  to  prevent  any  man,  rich  or 
poor,  from  doing  or  receiving  wrong,  whether  this  wrong  be 
one  of  cunning  or  of  violence.  Much  can  be  done  by  wise 
legislation  and  by  resolute  enforcement  of  the  law.  But 
still  more  must  be  done  by  steady  training  of  the  individual 
citizen  in  conscience  and  character  until  he  grows  to  abhor 
corruption  and  greed  and  tyranny  and  brutality  and  to 
prize  justice  and  fair  dealing." 

A  large  part  of  President  Roosevelt's  first  message  to 
Congress  was  devoted  to  a  discussion  of  the  corporation 
problem.  Stating  frankly  that  there  were  "real  and  grave 
evils"  in  the  business  system,  "one  of  the  chief  being  over- 
capitalization because  of  its  many  baleful  consequences," 
he  also  observed  that  "the  mechanism  of  the  modern  busi- 
ness world  is  so  delicate  that  extreme  care  must  be  taken 
not  to  interfere  with  it  in  a  spirit  of  rashness  or  ignor- 
ance." 

"The  first  essential  in  determining  how  to  deal  with  the 
great  industrial  combinations,"  he  wrote,  "is  knowledge 
of  the  facts — publicity.  In  the  interest  of  the  public  the 
Government  should  have  the  right  to  inspect  and  examine 
the  workings  of  the  great  corporations  engaged  in  inter- 
state business.  Publicity  is  the  only  sure  remedy  which 
we  can  now  invoke.  .  .  .  Artificial  bodies,  such  as  corpor- 
ations and  joint  stock  or  other  associations,  depending 
upon  any  statutory  law  for  their  existence  or  privileges, 
should  be  subject  to  proper  governmental  supervision, 
and  full  and  accurate  information  as  to  their  operations 


GOVERNMENT  REGULATION  521 

should  be  made  public  re^larly  at  reasonable  intervals." 
For  the  purpose  of  obtaining  publicity  concerning  the 
affairs  of  great  business  corporations  President  Roosevelt 
urged  the  creation  of  an  executive  department  of  ''Com- 
merce and  Industries, ' '  suggesting  that  the  law  establishing 
such  a  department  include  ''among  other  things  whatever 


Theodore  Roosevelt 

concerns  labor  and  all  matters  affecting  the  great  business 
corporations  and  our  merchant  marine."  It  was  not  until 
February,  1903,  that  final  action  on  this  recommendation 
was  taken.  At  that  time  a  law  was  passed  creating  a 
Department  of  Commerce  and  Labor.  As  a  part  of  the 
new  branch  of  the  executive  sj^stem  there  was  established 
a  Bureau  of  Corporations  which  was  authorized  to  make 


522  GOVERNMENT  REGULATION 

investigations  of  the  business  affairs  of  corporations, 
other  than  transportation  companies,  doing  an  interstate 
or  foreign  business. 

The  Roosevelt  Railroad  Legislation.  The  report  of  the 
Industrial  Commission  and  numerous  investigations  by  the 
Interstate  Commerce  Commission  had  revealed  the  exact 
nature  of  the  abuses  of  railroad  corporations,  and  President 
Roosevelt  needed  no  further  "publicity"  upon  which  to 
base  recommendations  as  to  railroad  legislation.  It  was  to 
the  problem  of  obtaining  this  legislation  that  he  first  bent 
his  energies  in  his  campaign  for  public  regulation  of  busi- 
ness. In  1903  the  Elkins  law  was  passed,  defining  more 
clearly  what  constituted  unfair  discrimination  between 
shippers  and  providing  more  appropriate  methods  for  the 
suppression  of  such  discrimination.  To  the  enactment  of 
this  law  there  was  little  or  no  opposition.  The  carriers 
themselves  were  opposed  to  a  policy  of  general  discrimina- 
tion because  it  often  caused  a  depletion  of  their  revenues, 
and  they  were  quite  willing  to  support  legislation  which 
might  bring  about  a  curtailment  of  the  practice  of  giving 
rebates  and  special  rates  to  large  numbers  of  shippers. 
The  Elkins  Law,  however,  did  not  provide  a  solution  of  the 
railroad  problem.  In  the  first  place  the  penalties  which 
the  law  imposed  were  insufficient  to  put  an  end  to  all  dis- 
crimination, and  many  large  shippers  continued  to  receive 
discriminating  favors  from  railroad  corporations.  In  the 
second  place  the  law  was  lacking  in  two  important  partic- 
ulars; it  did  not  apply  to  any  form  of  discrimination  ex- 
cept discrimination  between  persons,  and  it  afforded  no 
way  of  compelling  railroads  to  reduce  rates  which,  while 
not  discriminating,  were  unreasonably  high. 

In  his  annual  message  to  Congress  in  December,  1904, 
President  Roosevelt  singled  out  the  railroad  question  as 
the  most  important  subject  for  remedial  legislation,  and 
recommended    that    the    Interstate    Commerce    Act    be 


GOVERNMENT  REGULATION  523 

amended  so  as  to  make  it  possible  to  prevent  all  forms  of 
discrimination  and  so  as  to  give  the  Interstate  Commerce 
Commission  power  to  establish  reasonable  rates.  Failing 
to  secure  final  action  during  the  session  of  Congress  ending 
in  March,  1905,  the  President  renewed  his  recommenda- 
tions in  his  annual  message  of  December  of  that  year.  In 
this  message  he  carefully  analyzed  the  railroad  problem 
and  urged  in  the  strongest  terms  that  appropriate  legis- 
lation be  promptly  enacted.  Though  asserting  the  belief 
that  "on  the  whole  the  railroads  have  done  well  and  not 
ill,"  he  pointed  out  that  the  long  continued  misconduct 
of  a  part  of  the  railroad  interests  had  created  an  un- 
wholesome condition  in  the  entire  transportation  busi- 
ness. "We  desire,''  he  said,  "to  set  up  a  moral  standard. 
.  .  .  Business  success,  whether  for  the  individual  or  for 
the  Nation,  is  a  good  thing  only  so  far  as  it  is  accompanied 
by  and  develops  a  high  standard  of  conduct — honor,  in- 
tegrity, civic  courage." 

The  attempt  to  pass  a  new  railroad  law  met  with  the  most 
strenuous  opposition  from  the  powerful  railroad  and  finan- 
cial interests  which  had  taken  the  most  conspicuous  part  in 
the  evasion  and  violation  of  previous  laws.  These  interests 
concentrated  their  efforts  at  obstruction  on  the  Senate, 
where  their  influence  seemed  to  be  greatest,  and  exhausted 
every  means  at  their  command  to  secure  the  defeat  or 
amendment  of  the  proposed  law.  Only  the  insistent  deter- 
mination of  the  President  caused  the  bill  to  pass. 

The  new  law,  called  the  Hepburn  Act,  embodied  virtually 
all  the  recommendations  of  President  Roosevelt.  The  In- 
terstate Commerce  Commission  was  enlarged  by  the  ad- 
dition of  two  more  members,  and  its  powers  were  greatly 
increased.  It  was  not  only  authorized  to  declare  rates  un- 
reasonable but  was  given  the  power  to  name  rates  which  the 
carriers  should  observe  as  maximum  charges  in  place  of 
rates  declared  to  be  unreasonable.     It  was  given  authority 


524  GOVERNMENT  REGULATION 

to  prescribe  an  accounting  system  for  the  railroads  and  to 
order  the  carriers  to  desist  from  undue  discrimination  in 
rates  and  services.  "What  was  most  important,  the  orders 
of  the  Commission  were  to  have  binding  effect  unless  set 
aside  by  a  Federal  court.  Thus  the  burden  of  initiating 
litigation  to  test  the  validity  of  the  Commission's  orders 
fell  upon  the  railroads,  and  not  upon  the  Commission, 
as  had  previously  been  the  case. 

The  Pure  Food  Law.  Another  notable  piece  of  legisla- 
tion which  President  Roosevelt  procured  in  1906  was  the 
so-called  Pure  Food  Law.  For  more  than  a  score  of  years 
attempts  had  been  made  to  put  an  end  to  the  notorious 
traffic  in  adulterated  and  poisonous  food  products  which 
masqueraded  in  the  markets  of  the  country  under  false 
and  misleading  labels,  but  the  greedy  interests  which  de- 
rived profit  from  the  trade  had  successfully  smothered 
all  reform  measures.  The  bill  which  became  a  law  in  1906 
was  fought  even  in  a  more  determined  manner  than  the 
railroad  bill  was  opposed.  While  the  struggle  over  the 
bill  was  at  its  height  in  the  Senate,  President  Roosevelt 
transmitted  to  Congress  a  report  on  conditions  in  the 
slaughter-houses  of  the  Chicago  meat-packers.  This  re- 
port, which  was  made  by  an  unofficial  investigating 
commission  appointed  by  the  President,  cut  the  earth  from 
under  the  feet  of  those  members  of  Congress  who  seemed 
to  believe  that  there  was  no  necessity  for  enacting  legis- 
lation to  protect  the  public  against  impure  and  unwhole- 
some food  products.  An  overwhelming  public  sentiment 
backed  up  the  President  and  the  bill  which  he  supported 
was  speedily  passed.  The  law  forbade,  so  far  as  the 
power  of  Congress  to  regulate  interstate  commerce  made 
possible,  the  sale  of  any  misbranded,  adulterated  or  impure 
article  of  food  and  drugs.  It  also  provided  that  food  and 
drug  products  containing  alcohol  or  other  narcotic  should 
be  labeled  to  indicate  the  fact  and  the  quantity  of  alcohol 


GOVERNMENT  REGULATION  525 

or  other  narcotic  stated.  At  the  time  of  the  passage  of  the 
Pure  Food  Law  the  meat  inspection  laws  were  modified  so 
as  to  permit  a  more  thorough  governmental  supervision  of 
the  meat-packing  industry. 

Prosecutions  Under  the  Sherman  Antitrust  Law.  The 
facts  disclosed  in  investigations  of  industrial  corporations 
by  the  Bureau  of  Corporations  convinced  President  Roose- 
velt that  the  great  monopolistic  combinations  of  the  country 
should  be  subjected  to  further  regulation  just  as  the  rail- 
roads had  been.  Once  sure  of  the  facts  he  urged  Congress 
to  undertake  the  enactment  of  legislation  by  which  these 
combinations  could  be  controlled  by  the  Government.  He 
also  directed  the  Attorney-General  to  proceed  against  a 
number  of  industrial  combinations  for  violation  of  the 
Sherman  Antitrust  Law. 

After  the  decision  of  the  Supreme  Court  in  the  E.  C. 
Knight  case  it  had  been  commonly  thought  that  the  Sher- 
man Law  would  be  of  but  little  use  in  putting  an  end  to  the 
abuses  of  "big  business."  It  turned  out  that  the  decision 
in  this  case  was  to  have  little  influence  upon  the  outcome  of 
other  prosecutions  under  the  antitrust  act.  In  the  Knight 
case  the  Government  had  attacked  the  sale  of  the  Phila- 
delphia refineries  to  the  Sugar  Trust  and  asked  that  the 
contract  of  sale  be  set  aside.  This  action  the  Court  re- 
fused to  take  on  the  grounds  that  the  sale  of  the  refineries 
had  been  an  act  of  intrastate  trade  which  no  Federal  law 
could  affect.  The  Department  of  Justice  had  not  directly 
attacked  the  monopoly  resulting  from  the  sale  of  the 
refineries,  but  had  attacked  the  sale  of  the  refineries  out 
of  which  the  monopoly  grew.  There  was  a  distinction 
without  a  great  difference,  but  nevertheless  a  distinction 
which  the  Court,  with  careful  precision,  had  felt  bound 
to  observe.  When  later  the  Department  of  Justice  di- 
rected its  efforts  toward  combating  the  monopolies  es- 
tablished by  industrial   combinations,  it   was  found  that 


526  GOVERNMENT  REGULATION 

the  Sherman  Law  was  a  much  more  effective  weapon 
than  it  had  been  supposed  to  be.  Previous  to  the  Roose- 
velt prosecutions  the  only  important  instance  in  which  the 
Supreme  Court  had  employed  the  Sherman  Act  to  ex- 
tinguish an  industrial  monopoly  was  in  the  Addyston 
Pipe  case,  decided  in  1899.  In  this  case  the  Court  dis- 
solved a  combination  among  a  number  of  pipe  manufac- 
turers who  conspired  to  eliminate  all  competition  by 
organizing  a  pool,  fixing  prices,  and  dividing  the  market- 
ing territory  among  the  various  members  of  the  pool. 
In  1904  there  was  another  notable  decision  under  the 
Sherman  Law,  in  which  the  Supreme  Court  ordered  the 
virtual  dissolution  of  the  Northern  Securities  Company, 
a  railroad  combination  organized  by  the  Hill  and  the 
Ilarriman  interests.  These  two  decisions  had  fully  dem- 
onstrated the  possibilities  of  the  antitrust  legislation 
of  1890.  In  1905  the  Court  sustained  an  injunction  which 
had  been  issued  against  the  meat-packers,  ordering  them 
to  cease  their  unfair  methods  of  buying  live  stock  and 
selling  meat. 

In  1906  the  Department  of  Justice,  acting  under  the 
orders  of  President  Roosevelt,  instituted  suit  against  the 
Standard  Oil  Company  of  New  Jersey,  one  of  the  oldest 
and  perhaps  the  most  notorious  of  all  the  great  business 
combinations.  The  following  year  suits  were  begun 
against  the  American  Tobacco  Company  and  the  anthracite 
coal  combination.  The  President's  fight  for  a  new  moral 
standard  was  under  way. 

The  Opposition  of  "Big  Business."  Opposition  to 
President  Roosevelt's  policies  of  reform  was  not  long  in 
gathering  strength.  Neither  expense  nor  effort  was  spared 
to  discredit  his  policy  and  attack  his  purposes.  Vicious 
assaults  were  launched  against  the  Department  of  Justice, 
the  Bureau  of  Corporations  and  the  Interstate  Commerce 
Commission,  and  great  moneyed  interests  published  "huge 


GOVERNMENT  REGULATION  527 

advertisements  attacking  with  envenomed  bitterness  the  ad- 
ministration's  policy  of  warring  against  successful  dis- 
honesty." The  attacks  only  strengthened  President  Roose- 
velt's resolution.  His  characterization  of  the  opposition 
was  summed  up  in  a  special  message  transmitted  to  Con- 
gress January  31,  1908,  when  he  said,  "The  keynote  of  all 
these  attacks  upon  the  effort  to  secure  honesty  in  business 
and  in  politics  is  expressed  in  brazen  protests  against  any 
effort  for  the  moral  regeneration  of  the  business  world,  on 
the  ground  that  it  is  unnatural,  unwarranted  and  injur- 
ious, and  that  business  panic  is  the  necessary  penalty  for 
such  effort  to  secure  business  honesty.  The  morality  of 
such  a  plea  is  precisely  as  great  as  if  made  on  behalf  of 
the  men  caught  in  a  gambling  establishment  when  that 
gambling  establishment  is  raided  by  the  police."  Round- 
ly denouncing  the  ''malefactors  of  great  wealth"  who 
sought  to  stay  his  hand,  he  urged  Congress  to  carry  out 
a  program  of  constructive  legislation.  He  wanted  the 
Sherman  Law  strengthened  "to  secure  more  effective 
control  over  the  business  use  of  vast  masses  of  individual, 
and  especially  of  corporate  wealth  which  at  the  present 
time  monopolizes  most  of  the  interstate  business  of  the 
country."  "There  is,"  he  argued,  "grave  danger  to 
our  free  institutions  in  the  corrupting  influence  exercised 
by  great  wealth  suddenly  concentrated  in  the  hands  of 
the  few.  We  should  in  some  manner  try  to  remedy  this 
danger,  in  spite  of  the  sullen  opposition  of  these  few 
very  powerful  men,  and  with  the  full  purpose  to  protect 
them  in  all  their  rights  at  the  very  time  that  we  require 
them  to  deal  rightfully  with  others."  In  addition  to  the 
regulation  of  corporations  he  advocated  Federal  income 
and  inheritance  taxes,  the  prevention  of  the  abuse  of  the 
injunction  in  labor  disturbances,  and  the  enactment  of 
more  advanced  labor  laws.  • 
The  Failure  of  Congress.     Notwithstanding  President 


528  GOVERNMENT  REGULATION 

Roosevelt's  repeated  requests,  Congress  refused  to  act. 
For  nearly  three  years  he  worked  for  definite  reforms,  but 
after  the  passage  of  the  Hepburn  Act  and  the  Pure  Food 
Law  the  only  industrial  and  social  legislation  of  any  im- 
portance which  he  was  able  to  obtain  from  a  reluctant  and 
dilatory  Congress  was  an  employer's  liability  act,  ap- 
plicable chiefly  to  interstate  carriers,  passed  in  1908.  The 
most  urgent  special  message  which  he  sent  to  Congress  in 
the  spring  of  1908  asking  for  remedial  measures  suffered 
the  unusual  fate  of  not  being  read  before  that  body.  But, 
however  barren  of  effective  legislation  his  endeavors  proved 
to  be  after  1906,  his  fight  against  greed  and  corruption 
had  far  reaching  effects.  He  revealed  to  the  people  the 
true  nature  of  the  social  and  industrial  ills  of  the  nation, 
and  by  arousing  the  public  conscience  he  prepared  the  way 
for  reforms  which  he  could  not  himself  achieve. 

The  Tariff  and  the  Election  of  1908.  The  regulation 
of  business  was  still  the  leading  economic  and  political 
question  before  the  country  when  President  Roosevelt's 
administration  drew  to  a  close,  though  in  the  political 
campaign  of  1908  the  chief  issue  was  the  modification  of 
the  Dingley  Tariff  Act  which  had  been  passed  in  1897. 
A  large  number  of  people  believed  that  the  abuses  of  big 
business  had  been  made  possible  chiefly  by  the  high 
duties  carried  in  the  Dingley  Law.  While  evidence  of  a 
direct  causal  relation  between  the  tariff  and  the  "trusts" 
was  not  conclusive,  it  was  nevertheless  plain  that  the 
enormous  profits  of  many  monopolistic  organizations  had 
been  procured  the  more  easily  because  of  the  complete 
exclusion  of  foreign  competition.  For  several  years  pre- 
vious to  1908  there  had  been  a  steady  growth  of  dissatis- 
faction with  the  high  tariff  duties,  and  this  dissatisfaction 
finally  culminated  in  an  almost  universal  demand  that  the 
tariff  law  be  revised.  Both  the  leading  political  parties 
were  pledged  to  tariff  revision  in  their  platforms  of  1908, 


GOVERNMENT  REGULATION  529 

though  the  Republican  Party  adopted  a  conservative  at- 
titude on  the  question,  urging  that  the  work  of  revision 
be  entrusted  to  the  ''friends"  of  the  tariff  in  order  that 
there  should  be  no  abandonment  of  the  principle  of  pro- 
tection.    It  was  generally  understood,  however,  that  even 
if  the  Republicans  were  successful  in  the  election  there 
would  be  a  substantial  "downward  revision"  of  the  tariff. 
The  Payne-Aldrich  Act.     The  Republican  Party  won  a 
notable  success  at  the  polls,  and  President  Taft,  immedi- 
ately after  his  inauguration,  called  a  special  session  of  Con- 
gress to  deal  with  the  tariff  question.     Those  who  expected 
a  substantial  reduction  of  import  duties  were  disappointed. 
The  Payne-Aldrich  Act,  which  became  a  law  August  5, 
1909,  while  reducing  the  rates  of  duty  on  some  articles, 
on  the  whole  made  few  changes  of  any  importance.     The 
high   duties  on   woolen   manufactures,   retained  from  the 
Dingley  law,  were  very  obnoxious  to  the  public  at  large. 
The  law  was  generally  condemned,  and  in  the  Congres- 
sional elections  of  1910  popular  indignation  expressed  itself 
in  a  sweeping  victory-  for  the  Democratic  party,  the  first 
since  1892.     The  Republicans  retained  a  majority  of  the 
Senate,    however,   making   any  thorough   revision   of   the 
Payne-Aldrich  Act   impossible   during   the   remainder   of 
President    Taft's    administration.       Enough    Republican 
support  was  available  in  the  Senate  to  secure  the  passage 
of  bills  providing  for  the  modification  of  some  of  the  more 
excessive    duties,    but    all    these    bills    were    defeated    by 
Presidential  veto. 

Further  RegTilation  of  Business.  The  only  important 
Federal  legislation  for  the  regulation  of  business  enacted 
during  President  Taft's  term  of  office  was  the  Mann- 
Elkins  Act,  passed  in  1910,  for  the  further  regulation  of 
railroad  corporations.  The  most  notable  feature  of  this 
law  was  that  it  gave  the  Interstate  Commerce  Commission 
the  power  to  suspend  proposed  changes  in  railroad  rates 


530  GOVERNMENT  REGULATION 

pending  an  investigation  of  their  reasonableness.  Under 
the  Hepburn  Law  the  Commission  could  order  the  reduc- 
tion of  unreasonably  high  rates,  but  the  process  of  securing 
compliance  with  orders  for  rate  reduction  was  frequently 
slow  because  the  courts,  on  the  appeal  of  the  railroads, 
could  prevent  the  orders  from  having  immediate  effect. 
The  railroad  companies  could  increase  rates  to  an  unreason- 
ably high  level,  and  it  would  take  a  long  time  to  have 
charges  reduced.  Under  the  Mann-Elkins  Act  the  carriers 
were  deprived  of  the  power  arbitrarily  to  increase  their 
^  charges.  This  law  also  provided  that  express,  telegraph 
and  telephone  companies  should  be  included  within  the 
scope  of  the  Interstate  Commerce  Act.  Another  feature 
of  the  law  was  the  creation  of  a  Commerce  Court,  which  was 
authorized  to  hear  all  appeals  from  decisions  of  the  Inter- 
state Commerce  Commission.  This  court,  though  a  highly 
commendable  addition  to  the  machinery  for  railroad  reg- 
ulation, failed  to  meet  the  expectations  of  those  who  urged 
its  creation,  and  it  was  legislated  out  of  existence  three 
years  later. 

Little  was  accomplished  during  the  Taft  administration 
in  the  way  of  enacting  legislation  for  the  control  of  corpora- 
tions other  than  railroads,  though  several  bills  on  the  sub- 
ject of  business  regulation  were  introduced  in  Congress. 
There  was  a  marked  division  of  opinion  as  to  what  should 
be  the  character  of  further  legislative  enactments.  Some 
people  thought  that  the  trust  problem  would  "solve  itself" 
if  the  Government  would  see  that  competition  became  fair 
and  free,  while  others  thought  that  great  combinations,  be- 
ing a  natural  product  of  economic  evolution,  should  be 
permitted  to  continue  in  operation,  but  under  the  closest 
government  supervision.  President  Taft  was  a  thorough 
believer  in  the  efficacy  of  the  Sherman  Antitrust  Law  as  a 
corrective  of  the  evils  growing  out  of  the  combination  move- 
ment,  though   he  thought  that   a   law   should  be  passed 


GOVERNMENT  REGULATION  531 

defining  specifically  what  constituted  unfair  and  illegal 
methods  of  competition.  He  advised  that  the  great  busi- 
ness corporations  of  the  country  be  permitted  to  take  out 
Federal  charters,  and  recommended  the  creation  of  a  Fed- 
eral Corporation  Commission  whose  duty  it  should  be  to 
advise  with  the  officers  of  industrial  corporations  concerning 
the  nature  of  their  business  methods.  While  he  approved 
of  the  policy  of  price  regulation  in  connection  with  rail- 
roads, he  did  not  think  it  best  to  follow  such  a  policy 
with  respect  to  industrial  corporations. 

The  Industrial  Relations  Commission  Law.  The  labor 
problem  came  in  for  considerable  discussion  in  Congress 
during  the  latter  part  of  President  Taft's  administration. 
One  of  the  most  serious  phases  of  the  economic  situation  of 
the  United  States  was  the  growth  of  animosity  between 
organized  labor  and  organized  capital.  In  August,  1912, 
Congress  passed  an  act  creating  an  Industrial  Relations 
Commission  which  was  directed  to  "inquire  into  the 
general  condition  of  labor  in  the  principal  industries 
of  the  United  States."  The  Commission  was  to  consist  of 
nine  members,  three  representing  the  public,  three  rep- 
resenting employers  and  three  representing  labor.  In  De- 
cember President  Taft  sent  to  the  Senate  his  nominations 
of  members  of  the  Commission.  His  selections  did  not  meet 
with  much  public  approval,  and  the  Senate  refused  to 
confirm  the  nominations,  leaving  the  appointment  of  the 
Commission  to  the  next  administration. 

The  Trust  Decisions  of  the  Supreme  Court.  In  1911 
the  Supreme  Court  rendered  final  decisions  in  the  suits 
which  the  Department  of  Justice  had  instituted  during 
President  Roosevelt's  administration  against  the  Standard 
Oil  Company  of  New  Jersey  and  the  American  Tobacco 
Company.  The  Court  declared  that  both  these  corporations 
were  illegal  combinations  in  restraint  of  trade  and  ordered 
their  dissolution.     The  Standard  Oil  Company  was  directed 


532  GOVERNMENT  REGULATION 

to  divide  the  stock  of  its  subsidiary  companies  pro  rata 
among  its  stockholders,  while  the  tobacco  combination  was 
broken  up  into  several  distinct  organizations.  In  1912  the 
Court  ordered  the  dissolution  of  the  Union  Pacific-Southern 
Pacific  railroad  combination.  The  New  Haven  railroad 
combination  was  also  broken  up  by  the  Federal  courts. 

While  the  vigorous  enforcement  of  the  Sherman  Law 
resulted  in  the  dissolution  of  some  of  the  huge  industrial 
and  railroad  combinations  it  did  not  restore  perfect  free- 
dom of  competition.  The  component  parts  of  the  dis- 
solved oil  and  tobacco  trusts,  for  instance,  were  controlled 
by  individuals  who  realized  that  unrestricted  rivalry  would 
result  only  in  loss,  and  as  a  result  the  decisions  of  the 
Court  were  not  followed  by  any  pronounced  competitive 
activity  in  the  oil  and  the  tobacco  business.  The  Sherman 
Law  was  an  effective  instrument  only  for  contending 
against  mere  bigness  in  corporate  organization,  and  mere 
bigness  was  not  itself  the  fundamental  evil  of  the  com- 
bination movement.  What  was  needed  was  a  law  directed 
at  unfair  and  dishonest  business  conduct  whether  practised 
by  large  or  by  small  corporations. 

Another  defect  of  the  Sherman  Law  was  its  vagueness. 
In  the  oil  and  tobacco  decisions  the  Supreme  Court  took 
the  position  that  it  was  justified  in  ordering  the  dissolution 
of  a  business  combination  only  when  the  combination 
was  guilty  of  "unreasonable"  restraint  of  trade.  Since 
there  was  no  definite  test  of  the  "unreasonableness"  of  any 
form  of  restraint  of  trade,  the  business  world  became 
pervaded  with  a  spirit  of  uncertainty  which  did  much  to 
unsettle  business  conditions.  There  was  a  general  demand 
for  legislation  which  would  clarify  the  Sherman  Law,  but 
no  such  legislation  could  be  obtained  during  the  Taft  ad- 
ministration. 

State  Regnlation  of  Business.  While  the  Federal  Gov- 
ernment was  pursuing  a  vigorous  policy  with  respect  to 


GOVERNMENT  REGULATION  53.3 

railroad  regulation  and  wrestling  with  the  problems 
arising  in  connection  with  the  enforcement  of  the  Sher- 
man Law,  the  States  were  making  great  advances  in  the 
field  of  regulatory  legislation.  Public  utilities  in  partic- 
ular— railroads,  gas,  electric,  and  water  companies,  and 
telegraph  and  telephone  companies — were  subjected  to 
strict  regulation  in  nearly  every  State.  In  most  instances 
State  public  service  or  public  utility  commissions  were 
established  and  given  authority  to  regulate  and  supervise 
the  charges,  the  services  and  the  capitalization  of  public 
utility  corporations.  The  great  railroad  systems  thus 
came  in  for  a  great  deal  of  regulation  and  for  regulation 
of  many  varieties,  being  subjected  both  to  the  laws  of  the 
States  through  which  they  passed  and  to  the  laws  of  the 
Federal  Government.  In  many  States  pure  food  laws 
were  enacted  similar  to  the  Federal  law  passed  in  1906 ; 
throughout  the  North  and  in  some  Southern  States  child 
labor  was  abolished  and  education  made  compulsory;  and 
the  enactment  of  workmen's  compensation  laws  in  a  num- 
ber of  States  was  evidence  of  the  growing  sense  of  social 
responsibility  for  the  welfare  of  the  individual. 

The  Election  of  1912.  Ex-President  Roosevelt  was 
keenly  disappointed  because  of  the  failure  of  his  succes- 
sor's administration  energetically  to  press  for  the  measures 
of  industrial  and  social  reform  which  he  had  so  urgently 
advocated.  A  large  section  of  the  Republican  Party,  be- 
lieving with  Roosevelt  that  the  Taft  administration  was 
lacking  in  energy  and  purpose,  demanded  that  Roosevelt 
be  given  the  Republican  nomination  for  the'  presidency 
in  1912.  When  the  party  convention  renominated  Presi- 
dent Taft,  Roosevelt  and  his  followers,  charging  that  the 
convention  had  not  been  honestly  conducted,  ''bolted" 
the  party,  and  organizing  a  new  "Progressive  Party" 
carried  their  appeal  for  social  and  industrial  justice 
directly  to  the  people.     As  a  result  of  the  dissension  among 


534  GOVERNMENT  REGULATION 

the  Republicans  the  Democratic  Party  scored  an  easy  vic- 
tory, electing  Woodraw  Wilson  to  the  presidency  and 
obtaining  control  of  both  branches  of  Congress. 

President  Wilson's  Policies.  In  his  inaugural  address 
in  1913  President  Wilson  briefly  outlined  a  program  of 
constructive  legislation  which  he  desired  to  have  Congress 
follow.  Some  of  the  things  which  he  thought  should  be 
altered  were,  "A  tariff  which  cuts  us  off  from  our  proper 
part  in  the  commerce  of  the  world,  violates  the  just  prin- 
ciples of  taxation  and  makes  the  Government  a  facile  in- 
strument in  the  hands  of  private  interests;  a  banking 
and  currency  system  based  upon  the  necessity  of  the 
Government  to  sell  its  bonds  fifty  years  ago  .  .  .  ;  an 
industrial  system,  which  take  it  on  all  sides,  financial  as 
well  as  administrative,  holds  capital  in  leading  strings, 
restricts  the  liberties  and  limits  the  opportunities  of  labor, 
and  exploits  without  renewing  or  conserving  the  natural 
resources  of  the  country.  ..." 

The  first  eighteen  months  of  the  Wilson  administration 
set  a  record  for  the  enactment  of  progressive  legislation 
which  has  seldom  if  ever  been  equalled  in  the  history  of 
the  country.  Of  outstanding  importance  were  the  laws 
revising  the  tariff,  creating  the  Federal  Reserve  banking 
system,  clarifying  the  Sherman  Law,  and  creating  the 
Federal  Trade  Commission.  The  Federal  Reserve  Act 
was  not  so  much  for  the  regulation  of  business  as  for  the 
aid  of  the  nation's  production  and  trade,  and  an  account 
of  it  will  therefore  be  included  in  that  portion  of  the 
following  chapter  dealing  with  changes  in  banking  and 
currency. 

The  Underwood  Tariff.  Accepting  the  results  of  the 
elections  of  1910  and  1912  as  an  expression  of  popular 
disapproval  of  the  Republican  tariff  legislation  of  1909 
the  Democratic  administration  undertook  as  its  first  task 
a  complete  revision  of  the  tariff.     Substantial  reductions 


GOVERNMENT  REGULATION  535 

were  made  in  many  of  the  higher  duties,  and  the  list  of 
commodities  admitted  free  of  duty  was  enlarged,  the 
object  of  the  new  law  being,  as  the  President  expressed 
it,  to  "abolish  everything  that  bears  even  the  semblance 
of  privilege  or  of  any  kind  of  artificial  advantage,  and 
put  our  business  men  and  producers  under  the  stimula- 
tion of  a  constant  necessity  to  be  efficient,  economical 
and  enterprising,  masters  of  competitive  supremacy,  better 
workers  and  merchants  than  any  in  the  world."  Though 
the  new  taritf  act  prescribed  considerably  lower  duties 
than  those  of  the  Payne-Aldrich  Act,  it  was  b}^  no  means 
a  free  trade  measure,  the  average  rate  of  duty  being 
almost  thirty  per  cent  as  compared  w.ith  forty  per  cent 
under  the  previous  law.  One  feature  of  the  law  was 
provision  for  a  tax  on  incomes.  Congress  having  received 
power  to  levy  such  a  tax  by  a  constitutional  amendment 
which  took  effect  in  February,  1913. 

The  Federal  Trade  Commission  Established.  Appear- 
ing before  Congress  on  January  20,  1914,  President 
Wilson  urged  the  enactment  of  legislation  with  regard 
to  trusts  and  monopolies.  "The  business  of  the  country," 
he  said,  "awaits  also,  has  long  awaited  and  has  suffered 
because  it  could  not  obtain  further  and  more  explicit 
legislative  definition  of  the  policy  and  meaning  of  the 
existing  antitrust  law.  Nothing  hampers  business  like  un- 
certainty. Nothing  daunts  or  discourages  it  like  the  neces- 
sity to  take  chances,  to  run  the  risk  of  falling  under  the 
condemnation  of  the  law  before  it  can  make  sure  just  what 
the  law  is." 

Congress  proceeded  to  pass  two  bills  dealing  with  the 
problem  of  industrial  and  financial  combination.  The  first 
of  these,  approved  September  26,  1914,  declared  "unfair 
methods  of  competition  in  commerce"  to  be  unlawful,  and 
created  a  Federal  Trade  Commission  of  five  members,  to 
which  was  given  the  power  and  duty  of  preventing  the  use 


536  GOVERNMENT  REGULATION 

of  unfair  competitive  methods.  The  act  terminated  the 
existence  of  the  Bureau  of  Corporations  and  transferred 
all  the  Bureau's  investigational  powers  to  the  new  Commis- 
sion. The  Commission  has  power,  whenever  it  has  reason 
to  believe  that  unfair  methods  of  competition  in  commerce 
are  being  employed,  to  serve  a  complaint  upon  the  offender 
and  then  hold  a  hearing  to  sift  the  charges.  If  after  the 
hearing  the  Commission  is  of  the  opinion  that  the  method  of 
competition  in  question  is  unfair,  it  makes  a  report  of  its 
findings  and  directs  the  offender  to  cease  using  "such 
method  of  competition."  Should  the  order  be  disobeyed 
or  ignored  the  Commission  may  appeal  to  the  Federal 
Circuit  Court  of  Appeals  to  have  the  order  enforced.  The 
purpose  of  the  law  creating  the  Federal  Trade  Commission 
is  to  promote  upright  and  honorable  methods  in  business 
and  to  bring  about  the  elimination  of  practices  which  tend 
to  make  financial  strength  rather  than  productive  efficiency 
the  test  of  competitive  fitness. 

The  Clayton  Act.  Shortly  after  the  enactment  of  the 
Federal  Trade  Commission  Law  the  Clayton  Anti-trust  Act 
was  passed.  While  the  chief  purpose  of  Congress  in  enact- 
ing this  measure  was  to  define  specifically  certain  unfair 
practices  which  had  been  used  to  suppress  competition,  the 
law  is  an  "omnibus"  measure  dealing  with  a  variety  of  sub- 
jects. It  prohibits  discrimination  in  prices  between  dif- 
ferent purchasers  when  the  "effect  of  such  discrimination 
may  be  to  substantially  lessen  competition  or  tend  to  create 
a  monopoly  in  any  line  of  commerce";  it  declares  unlaw- 
ful all  exclusive  or  tying  contracts  made  upon  the  condition 
that  the  purchaser  of  goods  shall  not  deal  in  the  goods  of 
a  competitor  of  the  seller.  It  declares  that  "the  labor  of 
a  human  being  is  not  a  commodity  or  article  of  commerce," 
provides  that  "labor,  agricultural  or  horticultural  organ- 
izations, instituted  for  the  purpose  of  mutual  help,  and 
not  having  capital  stock  or  conducted  for  profit"  shall  not 


GOVERNMENT  REGULATION  537 

be  held  to  be  illegal  combinations  under  the  anti-trust  laws, 
and  imposes  certain  restrictions  on  the  use  of  the  injunction 
in  labor  disputes.  It  prohibits  any  corporation  engaged 
in  interstate  commerce  from  owning  the  shares  of  another 
corporation  where  the  effect  of  the  ownership  would  be 
**to  substantially  lessen  competition"  between  the  com- 
panies or  "tend  to  create  a  monopoly  in  any  line  of  com- 
merce," and  imposes  restrictions  on  the  creation  of  com- 
munities of  interest  through  the  establishment  of  inter- 
locking directorates. 

The  Webb  Act.  The  program  of  the  Wilson  administra- 
tion for  trust  legislation  included  a  plan  to  exempt  export 
trade  combinations  from  the  restrictions  imposed  by  the 
anti-trust  laws.  Other  countries,  particularly  the  manufac- 
turing countries  of  Europe  which  sold  goods  abroad  in  com- 
petition with  the  United  States,  permitted  the  fu-llest  co- 
operation among  merchants  engaged  in  developing  foreign 
markets.  The  exporters  of  the  United  States  were  thus 
placed  at  a  disadvantage.  The  administration  did  not  suc- 
ceed in  enacting  a  law  permitting  combinations  in  export 
trade  until  April,  1918,  when  the  Webb  Act  was  passed. 
This  law  provides  that  American  exporters  may  organize 
associations  for  conducting  export  trade  without  violation 
of  the  anti-trust  laws.  The  Federal  Trade  Commission 
has  power  to  supervise  the  activities  of  such  associations 
in  order  to  prevent  their  being  made  the  vehicle  of  unlaw- 
ful combinations  in  domestic  commerce. 

The  Railroad  Problem.  While  the  new  administration 
was  endeavoring  to  establish  new  and  better  methods  of 
dealing  with  the  problem  of  industrial  monopoly  the  rail- 
road legislation  of  1906  and  1910  began  to  produce  results 
of  an  unexpected  character.  Tlie  legislation  of  these  years 
was  directed  primaril}',  if  not  wholly,  to  the  creation  of 
machinery  for  the  reduction  of  railroad  rates.  Nearly  all 
the  State  laws  for  railroad  regulation  were  passed  with 


538  GOVERNMENT  REGULATION 

the  same  object  in  view.  It  did  not  seem  to  occur  to  the 
members  of  Congress  and  of  State  legislatures  that  a  time 
might  come  when  it  would  be  necessary  for  the  level  of  rail- 
road rates  to  be  quickly  and  easily  raised.  Such  a  time 
did  come  during  the  four  years  following  1911,  and  the 
faults  of  the  governmental  railroad  policy  were  exposed. 
"With  the  general  advance  of  prices  which  began  in  the 
late  nineties  the  costs  of  railroad  operation  steadily 
mounted.  A  higher  cost  of  living  necessitated  higher 
wages  for  railroad  employees,  and  rising  costs  of  coal, 
lumber  and  equipment  were  reflected  in  greatly  increased 
expenditures  by  the  railroads  for  all  the  raw  materials  and 
supplies  needed  for  maintenance  and  operation.  As  the 
cost  of  railroad  operation  advanced  the  net  income  of  the 
carriers  declined,  and  with  declining  net  income  it  became 
harder  for  the  carriers  to  obtain  the  capital  funds  needed 
to  finance  new  construction  and  the  purchase  of  new  equip- 
ment. In  1910  the  railroads  endeavored  to  make  a  general 
increase  of  rates,  but  the  Interstate  Commerce  Commission 
refused  to  permit  it.  In  1913  the  eastern  roads  tried  to 
get  a  five  per  cent  increase  in  freight  rates,  and  once  more 
the  Interstate  Commerce  Commission  refused  the  companies 
all  they  demanded.  While  there  was  much  difference  of 
opinion  as  to  the  merits  of  the  Commission's  decisions  in 
these  rate  cases  there  was  a  feeling  throughout  most  of  the 
business  community  that  the  Commission  should  have  been 
more  generous  to  the  roads. 

At  any  rate  the  railroad  problem  again  became  serious. 
Partly  because  of  depleted  revenues,  but  chiefly  because  of 
poor  management  and  improper  financial  manipulation,  a 
large  number  of  roads  became  bankrupt  during  the  three 
years  following  1911,  the  mileage  of  line  in  the  hands  of 
receivers  reaching  a  total  of  42,000  in  1915.  Investors  be- 
came alarmed  about  the  future  of  the  railroad  business, 
and  railway  securities  declined  steadily  in  value.     To  make 


GOVERNMENT  REGULATION  539 

the  lot  of  the  carriers  more  difficult  the  railway  labor  organ- 
izations demanded  a  large  increase  in  wages.  When  the 
Jluropean  war  broke  out  in  1914  the  railroads  were  at  a 
low  level  of  prosperity,  and  when  the  great  increase  in 
traffic  caused  by  a  heavy  war  trade  set  in  they  were  unable 
to  meet  the  demands  of  the  shipping  public. 

In  an  address  to  Congress  in  December,  1915,  President 
Wilson  advised  that  a  commission  be  appointed  to  under- 
take a  thorough  investigation  of  the  entire  railroad  problem. 
The  following  June  a  joint  committee  of  Congress  consisting 
of  five  members  of  each  house  was  appointed  to  conduct 
the  investigation.  Before  the  committee  could  formulate 
a  plan  for  constructive  legislation  the  railroad  problem 
reached  a  stage  which  necessitated  summary  action.  To 
avert  an  impending  general  railroad  strike  a  law  was 
passed  in  September,  1916,  providing  that  the  wages  of 
railroad  trainmen  should  be  based  upon  an  eight-hour  day 
with  pro  rata  pay  for  overtime.  For  the  fiscal  j^ear  ending 
June  30,  1916,  the  railroads  had  the  largest  net  income  they 
had  ever  received  up  to  that  time,  but  with  a  rapid  rise  of 
operating  expenses  during  the  ensuing  year  net  revenues 
showed  a  steady  and  rapid  decline.  The  winter  of  1916 
brought  a  congestion  of  traffic  with  which  the  carriers  were 
unable  to  cope.  The  entrance  of  the  United  States  into  the 
war  was  followed  soon  by  an  acute  crisis  in  the  railroad 
situation,  which  resulted  in  the  operation  of  the  roads  by 
the  Government.  The  rewriting  of  the  Federal  railroad 
laws  was  necessarily  postponed  until  after  the  war. 

Results  of  the  Wilson  Antitrust  Legislation.  The  com- 
ing of  the  World  War  caused  such  a  complete  readjustment 
of  the  economic  organization  of  the  United  States  that  the 
antitrust  legislation  of  the  first  Wilson  administration  has 
not  been  subjected  to  an  adequate  test.  The  war  changed 
the  character  of  foreign  trade  to  such  an  extent  that  no 
estimate  even  can  be  made  of  the  influence  of  the  Under- 


540  GOVERNMENT  REGULATION 

wood  Tariff  Law.  The  Federal  Trade  Commission  has  done 
some  excellent  work,  preparing  illuminating  reports  upon 
certain  subjects  of  economic  importance,  and  employing 
its  administrative  powers  on  numerous  occasions  to  put  an 
end  to  unfair  methods  of  competition.  However,  it  is  too 
early  to  pass  final  judgment  on  the  efficacv  of  the  Federal 
Trade  Commission  as  an  agency  for  business  regulation. 
Unquestionably  both  the  Ti'ade  Commission  Act  and  the 
Clayton  Law  mark  a  distinct  advance  in  the  methods  of 
government  regulation  of  business,  but  the  operation  of 
these  laws  must  be  observed  during  normal  times  of  peace 
before  it  will  be  possible  to  determine  whether  it  will  be 
wise  to  adopt  a  different  policy  of  corporation  control. 

Questions  and  Topics 

1.  "Write  a  brief  account  of  the  public  services  of  Theo- 
dore Roosevelt. 

2.  In  what  way  did  the  laws  for  the  regulation  of  indus- 
trial corporations,  passed  during  the  first  Wilson  admin- 
istration, resemble  the  laws  previously  enacted  for  the  reg- 
ulation of  railroads? 

3.  Do  you  think  it  would  be  wise  to  regulate  large  indus- 
trial corporations  as  railroads  are  regulated? 

4.  In  what  ways  does  your  own  State  regulate  public 
utilities  ? 


CHAPTER  XXVI 
ECONOMIC  PROGRESS,  1897-1914 

Industrial  America.  In  the  closing  years  of  the  nine- 
teenth century,  after  recovering  from  the  worst  effects  of 
the  depression  of  1893-94,  the  United  States  entered  upon  a 
period  of  remarkable  industrial  development,  which  soon 
gave  the  country  a  leading  place  among  the  industrial 
nations  of  the  world.  Manufacturing  beca»me  more  and 
more  the  economic  activity  of  primary  importance,  and 
agriculture,  though  continuing  to  flourish,  expanded  at  a 
slower  rate  than  in  previous  years.  The  change  from  a 
nation  primarily  agricultural  to  a  great  industrial  nation 
was  marked  by  the  steady  increase  of  the  urban  population 
as  compared  with  the  rural  population.  In  1890  slightly 
more  than  36  per  cent  of  the  people  of  the  United  States 
lived  in  towns  and  cities  having  a  population  of  2500  or 
more.  The  census  of  1910  showed  that  the  percentage 
of  urban  population  had  increased  to  46.3  and  the  early 
figures  of  the  census  of  1920  indicate  that  more  than  one- 
half  the  population  now  lives  in  urban  centers.  The 
factory,  the  store,  the  office  have  attracted  each  year  a 
greater  number  of  people  than  the  farms. 

Immigration.  The  development  of  manufacturing  and 
mining  drew  large  numbers  of  aliens  to  the  United  States, 
but  the  immigration  to  industrial  America  was  quite  dif- 
ferent from  the  immigration  to  agricultural  America.  As 
the  acreage  of  unoccupied  tillable  land  declined  immigrants 
came  in  smaller  numbers  from  the  British  Isles,  Germany 
and   other   countries   of   western    Europe.     The    working 

541 


542  ECONOMIC  PROGRESS,  1897-1914 

forces  of  mines  and  mills  were  recruited  largely  from  the 
peasants  and  unskilled  laborers  of  Italy,  Austria-Hungary, 
Russia  and  the  Balkan  countries.  Following  the  depression 
of  1893-94  immigration  reached  its  lowest  level  in  1898 
when  229,299  aliens  arrived.  After  that  year  immigration 
increased  rapidly  until  1907,  when  1,285,549  foreigners 
landed  in  the  United  States.  This  year  marked  the  high 
tide  of  foreign  immigration,  though  during  the  next  seven 
years  the  number  of  arrivals  annually  did  not  fall  below 
750,000,  and  in  three  years  was  above  a  million.  Of  the 
six  million  immigrants  who  landed  between  1901  and  1907 
more  than  one-half  came  from  southern  and  eastern  Europe. 
Nearly  all  the  aliens  from  these  sections  settled  in  the 
great  industrial  centers,  the  Italians  and  Hebrews  tending 
to  stay  at  the*  ports  which  they  entered — chiefly  New  York 
and  Boston — where  most  of  them  found  employment  in  the 
clothing  trades ;  the  Hungarians,  Austrians  and  Poles  mak- 
ing their  way  to  the  coal  mines,  steel  mills  and  slaughter 
houses  of  the  Eastern  and  Central  States.  The  problem 
of  Chinese  immigration  on  the  Pacific  coast  was  succeeded 
by  the  problem  of  Japanese  immigration. 

The  alien  invasion  tended  to  lower  the  American  standard 
of  living,  and  there  were  urgent  demands  from  labor  or- 
ganizations and  other  groups  of  citizens  that  legislation  be 
enacted  for  a  greater  restriction  of  foreign  immigration. 
The  Chinese  exclusion  lavw?  were  made  permanent  in  1904 
and  a  "gentlemen's  agreement"  with  Japan  concluded  in 
1907,  brought  to  an  end  the  immigration  of  Japanese  labor- 
ers to  the  United  States.  Bills  were  introduced  in  Congress 
to  provide  stricter  tests  for  -the  admission  of  aliens. 
There  was  much  difficulty  in  selecting  suitable  tests  which 
would  have  the  effect  of  keeping  down  the  quantity  of  im- 
migration without  affecting  adversely  the  quality.  The 
opponents  to  immigration  finally"  centered  their  efforts  on 
the  literacy  test.     A  bill  embodying  a  literacy  test  passed 


ECONOMIC  PROGRESS,  1897-1914  543 

Congress  in  1896  and  was  vetoed  by  President  Cleveland. 
President  Taft  vetoed  a  similar  bill  in  1913  and  President 
Wilson  took  similar  action  in  1915  and  again  in  1917,  In 
1917  however  Congress  succeeded  in  passing  the  immigra- 
tion act  over  the  presidential  veto.  The  law  excludes  "all 
aliens  over  sixteen  years  of  age,  physically  capable  of  read- 
ing, who  can  not  read  the  English  language  or  some  other 
written  language  or  dialect  including  Hebrew  and  Yid- 
dish." 

Manufacturing.  The  capital  invested  in  the  manufac- 
turing industries  of  the  United  States  grew  from 
$6,525,050,000  in  1890  to  $22,790,980,000  in  1914.  During 
the  same  period  the  number  of  wage  earners  in  manufac- 
turing increased  from  4,251,535  to  7,036,337  and  the 
value  of  articles  produced  advanced  from  $9,372,378, 
843  to  $24,246,434,724.  Even  more  suggestive  than  the 
statistics  just  given  are  the  statistics  showing  the  in- 
creases in  the  production  of  coal,  iron  and  copper,  the 
three  basic  materials  of  modern  industrialism.  In  1890 
the  output  of  coal  in  the  United  States  was  140,866,931 
tons;  in  1913  it  was  508,893,052  tons.  Tha  production  of 
iron  ore  increased  from  16,036,043  tons  to  59,643,098  tons, 
while  that  of  copper  advanced  from  115,966  tons  to 
546,645  tons. 

The  modern  industrial  period  is  frequently  called  the 
"age  of  steel"  because  there  is  no  productive  activity 
of  importance  in  which  steel  is  not  a  necessity.  In  agri- 
culture, in  mining,  in  transportation,  and  in  all  the  varied 
manufacturing  industries  the  tools,  machines  and  equip- 
ment are  made  partly  or  wholly  of  steel.  In  the  construc- 
tion of  buildings  steel  is  an  almost  indispensable  material. 
The  great  skyscrapers  which  house  the  banks,  stores,  offices 
and  workshops  of  the  large  cities  are  built  of  a  framework 
of  steel.  So  closely  related  is  the  iron  and  steel  industry 
to  all  other  kinds  of  industiy  that  it  is  regarded  as  a 


544         ECONOMIC  PROGRESS,  1897-1914 

"barometer  of  business",  the  trend  in  the  iron  and  steel 
trade  being  looked  upon  as  a  sure  indication  of  the  trend 
in  all  business.  Between  1890  and  1913  the  production 
of  steel  in  the  United  States  increased  from  4,277,071  tons 
to  31,300,844  tons.  Early  in  the  twentieth  century  the 
United  States  passed  all  other  nations  in  the  production 
of  iron  and  steel.  There  were  few  changes  in  the  methods 
of  steel  production  except  that  operations  in  all  parts  of 


Tapping  an  Open  Hearth  Furnace 
Courtesy  of  Bethlehem  Steel  Company. 

the  industry  were  conducted  on  a  larger  scale.  Both  the 
open-hearth  and  the  Bessemer  process  of  converting  pig 
iron  into  steel  continued  in  use,  though  the  open-hearth 
method  gradually  gained  in  favor  until  by  1908  it 
established  a  lead  over  the  older  process. 

In  other  manufacturing  industries  the  United  States 
showed  progress  as  great  as  in  the  production  of  iron  and 
steel.     The  conversion  of  raw  food  materials  into  commodi- 


ECONOMIC  PROGRESS,  1897-1914         545 

ties  for  human  consumption  remained  the  leading  manu- 
facturing industry.  In  the  manufacture  of  textiles  of 
cotton,  wool  and  silk,  and  in  the  production  of  paper,  glass, 
leather  and  lumber  there  was  rapid  expansion,  while  in  the 
production  of  finished  goods  from  these  materials,  such  a^ 
clothing,  boots  and  shoes,  books,  newspapers,  and  furniture, 
the  same  remarkable  development  took  place  as  in  the 
production  of  finished  articles  of  iron  and  steel. 


Pouring  Steel  into  Ingot  Moulds 
Courtesy  of  Bethlehem  Steel  Com  pan]/. 

Of  the  new  manufacturing  industries  which  developed 
between  1897  and  1914  the  automobile  industry  was  easily 
the  most  important.  Starting  in  a  modest  way  almost  at 
the  beginning  of  the  twentieth  century  this  remarkable 
industry  grew  at  such  a  rate  that  in  1914  it  was  holding 
promise  of  becoming  the  leading  manufacturing  industry 
of  America.  Having  the  advantage  of  an  early  start  in 
this  industry,  Detroit  and  Cleveland  took  the  lead  as  pro- 


546 


ECONOMIC  PROGRESS,  1897-1914< 


ducing  centers,  though  in  many  cities  of  both  the  Eastern 
and  the  Central  States,  where  the  manufacture  of  vehicles 
had  long  been  a  prominent  industry,  a  thriving  automobile 
business  was  developed.  Closely  connected  with  the  growth 
of  the  automobile  manufacturing  was  the  manufacture  of 
rubber  tires,  of  which  Akron,  Ohio,  became  the  chief  center. 
The  manufacture  of  automobile  accessories,  such  as  storage 
batteries,  magnetos,  lighting  systems  and  wind-shields,  the 


Hot  Ingot  Passing  Through  Rolls 
Courtesy  of  Bethlehem  Steel  Companu. 

manufacture  of  automobile  parts  for  use  in  the  production 
of  "assembled  cars,"  and  the  maintenance  and  repair  of 
automobiles  opened  new  lines  of  employment  to  thousands 
of  workmen  and  gave  opportunity  for  the  investment  of 
millions  of  dollars. 

Another  virtually  new  industry  which  assumed  a  place 
of  high  rank  during  the  opening  years  of  the  twentieth 
century  was  the  manufacture  of  electrical  equipment.     The 


ECONOMIC  PROGRESS,  1897-191 4         547 

electric  motor  and  the  insulated  copper  wire  displaced  the 
flying  belt  and  whirling  shafting  in  hundreds  upon  hun- 
dreds of  manufacturing  plants.  There  was  not  a  single 
manufacturing  industry  of  importance  in  the  country 
which  did  not  employ  electricity  as  a  source  of  light  or 
of  power,  and  in  many  industries  the  electric  motor,  fed 
with  current  from  a  central  power  plant  built  to  serve 
many  customers,  completely  displaced  the  steam  engine. 


A  Modern  Motor  Truck 
Courtesy  of  the  Packard-  Motor  Car  Company. 

The  automobile  could  not  have  attained  its  high  state  of 
perfection  without  the  service  of  electricity.  The  use  of 
electric  power  in  transportation  on  city  and  interurban 
railways,  and  the  partial  substitution  of  electric  power  for 
steam  on  a  few  railroads  created  a  large  demand  for 
electrical  equipment.  The  introduction  of  wireless  telegra- 
phy in  1900  also  led  to  an  increased  demand  for  many 
electrical    devices.     Just    as    interesting    as    the    growing 


548  ECONOMIC  PROGRESS,  1897-1914 

use  of  electrical  appliances  in  manufacturing  and  trans- 
portation was  the  increased  application  of  electric  power 
to  household  tasks  which  for  ages  had  been  little  but  monot- 
onous drudgerj^  Electric  washing  machines,  mangles  and 
flat-irons  did  the  family  laundry,  the  vacuum  cleaner  re- 
placed brush  and  broom,  electric  fans  brought  cooling 
breezes  in  summer,  small  motors  took  the  place  of  the  sewing 
machine  treadle,  electric  refrigerators  kept  foods  cool  and 
sweet,  and  single  electrical  cooking  appliances  such  as 
toasters,  grills  and  coffee  percolators,  or  complete  electric 
stoves  and  ranges  made  the  burden  of  kitchen  labor  easier. 
The  labor  of  the  farmers  was  lightened  by  the  introduction 


The  Packard  Motor  Car  Factory  at  Detroit 
Courtesy  of  the  Packard  Motor  Car  Companij- 

of  electric  power  plants.  Current  generated  by  dynamos 
driven  with  small  gasoline  engines  provided  energy  to  saw 
wood,  grind  grain,  separate  cream  from  milk,  churn  but- 
ter, milk  cows,  and  give  illumination  in  houses,  barns  and 
other  farm  buildings. 

American  Manufactures  in  Foreign  Markets.  With  a 
home  market  fully  protected  against  foreign  competition 
and  an  organization  that  prevented  excessive  domestic 
competition  American  manufacturers  disposed  of  their 
goods  at  prices  which  brought  them  handsome  profits.  Un- 
der the  stimulation  of  large  earnings  business  expanded 
rapidly,  and  it  was  not  long  until  a  productive  capacity 
was  attained  considerably  bej'ond  the  needs  of  the  home 


ECONOMIC  PROGRESS,  1897-1914         549 

trade.     It   became  necessary  for  American   producers   of 
manufactured  goods  to  turn  to  foreign  fields  to  dispose  of 
their  surplus  stocks.     It  was  not  unusual   for  American 
manufactured  goods  to  be  sold  abroad  at  prices  much  lower 
than  the  prices  charged  the  home  consumer,  the  manufac- 
turers justifying  this  practice  on  the  ground  that  it  was 
better  to  keep  their  factories  running  than  to  try  to  limit 
production  to  the  home  demand.     Lower  prices  to  foreign 
purchasers  were  the  exception  however  rather  than  the  rule. 
The  skill  of  American  labor,   the  efficiency  of  American 
organization,  and  the  extensive  use  of  machinery  enabled 
the  American  manufacturers  to  compete  on  favorable  terms 
with  foreign  rivals  in  the  face  of  the  high  wages  prevailing 
in  the  United   States.     ^lanufactures   came  to   constitute 
an  important  part  of  American  exports.     Agricultural  im- 
plements, structural  steel,  railway  equipment,  drugs  and 
chemicals,  automobiles,  boots  and  shoes,  textiles,  and  wood 
manufactures  went  to  foreign  markets  in  increasing  quan- 
tities.    In  1890  ''manufactures  for  further  use  in  manufac- 
turing" made  up  5.5  per  cent  of  the  total  merchandise 
exports  of  the  United  States,  and  "manufactures  ready  for 
consumption"    (excluding  all  foodstuffs)    made  up   15.68 
per  cent.     In  1913  these  two  classes  of  merchandise  made 
up  respectively  16.83  per  cent  and  31.97  per  cent  of  the 
total  value  of  goods  sold  abroad. 

Milling  and  Lumbering.  The  growth  of  manufacturing 
caused  heavy  inroads  to  be  made  upon  the  mineral  and 
forest  resources  of  the  United  States.  The  increase  in  the 
production  of  coal,  iron  and  copper  has  already  been 
mentioned.  There  was  a  similar  increase  in  the  production 
of  lead  and  zinc.  The  discovery  of  new  gold-fields  in 
Alaska  and  the  development  of  processes  which  made  it 
possible  to  work  economically  the  poorer  gold-bearing  rocks 
and  gravels  of  the  Western  States  brought  about  an  in- 
crease in  the  production  of  gold  from  an  annual  average 


550  ECONOMIC  PROGRESS,  1897-1914 

of  about  $35,000,000  in  the  decade  preceding  1895  to  an 
annual  average  exceeding  $80,000,000  during  the  following 
15  years.  The  production  of  petroleum,  which  reached 
two  billion  barrels  a  year  in  1890,  grew  to  more  than 
eleven  billion  barrels  yearly  by  1914.  The  automobile 
created  an  enormous  market  for  gasoline  and  lubricating 
oils;  crude  oil  was  used  in  great  quantities  for  making 
artificial  gas  and  as  fuel  for  oil-burning  steamships  and 
locomotives.  The  oil  fields  of  California,  Texas,  Louisiana 
and  Oklahoma  supplied  most  of  the  petroleum  produced  in 
the  United  States  after  1900.  Crude  oil  was  imported 
from  Mexico  to  be  converted  into  refined  products  for 
domestic  use  and  for  export. 

The  industrial  development  of  America  was  accompanied 
by  building  operations  which  created  a  demand  for  huge 
supplies  of  lumber.  By  1910  the  annual  output  of  lumber 
in  the  United  States  was  forty  billion  feet,  this  not  includ- 
ing firewood,  which  in  1914  amounted  to  about  eight  billion 
feet.  With  the  depletion  of  the  white  pine  forests  of  the 
region  about  the  Great  Lakes  the  chief  center  of  the  lum- 
ber industry  shifted  to  the  yellow  pine  forests  of  the  South, 
and  heavier  drains  were  made  upon  the  pine  and  fir  re- 
sources of  the  Pacific  coast.  Oregon  lumber  and  shingles 
were  shipped  across  the  continent  to  ]\Iaine,  which  had 
once  been  the  leading  lumber-producing  State  of  the 
union. 

Agriculture.  It  was  pointed  out  above  that  one  of  the 
most  noteworthy  features  of  the  growth  of  industrialism 
in  America  was  the  drift  of  population  from  rural  to  urban 
communities.  There  were  many  reasons  for  this  drift. 
The  factory  or  office  worker  had  shorter  work  days  as  a 
rule  than  the  farm  laborer  and  he  was  not  constantly 
"tied  down"  to  his  employment  week  days  and  Sundays, 
month  in  and  month  out.  While  the  real  wages  of  the 
farm  laborer  differed  but  little  from  the  real  wages  of  the 


ECONOMIC  PROGRESS,  1897-1914         551 

industrial  laborer,  the  latter  worker  received  his  pay  wholly 
in  the  form  of  money,  and  consequently  he  had  a  wider 
range  of  choice  and  a  greater  freedom  in  determining  what 
should  be  the  nature  of  his  real  income.  The  city  dweller 
had  greater  variety  than  the  country  dweller.  The  city 
offered  advantages  in  the  way  of  many  opportunities  for 
amusement,  recreation  and  education ;  and  the  city  worker 


Machines   Equipped  with  Individual   Electric  Motors 

Courtesy  of  Bobbins  and  Myers  Co. 

had  a  certain  amount  of  free  time  at  his  disposal  in  which 
he  could  indulge  an  inclination  to  have  a  "good  time." 
Then  it  is  a  well-known  fact  that  many  workingmen  look 
upon  farm  labor  as  compared  with  factory  and  office  work 
in  about  the  same  way  that  working  girls  and  women  re- 
gard the  work  of  a  household  servant  as  compared  with  the 
work  of  a  clerk  or  stenographer.  A  sort  of  contempt  for 
farm  work  and  for  the  conditions  of  rural  life  unquestion- 


552 


ECONOMIC  PROGRESS,  1897-1914 


ably  caused  many  country  boys  to  abandon  the  calling  of 
their  fathers  and  seek  their  fortunes  in  the  city. 

Whatever  the  reasons  for  the  migration  of  labor  from 
farm  to  city  the  migration  occurred  to  such  an  extent 
that  the  production  of  many  American  farm  staples  failed 
to  keep  pace  with  the  growth  of  population.  The  acreage 
of  wheat  planted  and  the  annual  production  of  wheat  rose 
but  slowly  from  1900  to  1914,  and  there  was  a  decline  in 
the   quantity   raised  per   capita.     In   the   production   of 


Orange  Grove  in  Southern  California 

Courtesy  of  California  Fruit  Growers'  Exchange. 

corn  and  cotton  the  rate  of  increase  was  less  than  the  rate 
of  increase  in  the  number  of  people  in  the  country.  There 
was  no  substantial  increase  in  the  quantity  of  live  stock 
raised  on  American  farms.  The  decline  in  the  production 
of  wheat  was  particularly  noticeable  in  the  diminution 
of  the  exports  of  wheat  and  flour.  Whereas  the  average 
annual  exports  of  wheat  and  flour  from  1896  to  1900  in- 
clusive amounted  to  179,518,025  bushels  of  wheat,  the 
annual  average  from  1909  to  1913  inclusive  was  118,702,695 
bushels.     It  was  freely  predicted  that  within  a  short  time 


ECONOMIC  PROGRESS,  1897-1914 


553 


the  United  States  would  become  a  food  importing  instead 
of  a  food  exporting  nation.  Had  the  relative  decline  in 
farm  labor  not  been  offset  in  a  measure  by  the  increased 
use  of  machinery  and  by  more  scientific  methods  of 
agriculture  the  total  product  of  the  farms  of  the  United 
States  would  have  been  much  smaller.  A  few  entirely  new 
machines  were  introduced  such  as  the  corn  harvester  and 
the  corn  shredder ;  and  improved  types  of  plows  and  culti- 


Packing  Oranges  for  Shipment 

Courtesy  of  California  Fruit  Growers'  Exchange. 

vators  enabled  single  laborers  working  with  teams  often  to 
do  twice  as  much  work  as  they  had  been  able  to  accomplish 
with  older  types  of  machinery.  However  there  was  no 
such  revolution  in  the  methods  of  farm  production  as  that 
inaugurated  by  the  introduction  of  the  reaper,  thresher 
and  portable  steam  engine  during  the  two  decades  pre- 
ceding the  Civil  War. 
Improved  Conditions  of  Rural  Life.    The  drift  of  popu- 


554         ECONOMIC  PROGRESS,  1897-1914 

lation  from  country  to  city  was  retarded  to  some  extent 
by  various  improvements  in  the  conditions  of  rural  living. 
The  establishment  of  rural  free  delivery  of  mail  in  1902 
brought  country  districts  into  closer  touch  with  urban 
centers,  and  the  general  installation  of  telephone  service 
in  the  more  densely  settled  farming  regions  had  a  similar 
effect.  The  telephone  also  decreased  measurably  the  iso- 
lation of  rural  life.  The  parcel  post  service,  begun  in  1913, 
wrought  a  great  improvement  in  the  commercial  life  of 
country  districts.  A  progressive  educational  policy  in 
many  States  resulted  in  the  consolidation  of  rural  schools, 
giving  to  country  children  the  advantage  of  educational 
facilities  equal  to  those  possessed  by  inhabitants  of  many 
cities.  The  construction  of  interurban  electric  railways 
in  many  sections  of  the  United  States  gave  rural  dwellers 
ready  means  of  access  to  nearby  cities  and  seemed  to  pro- 
mote a  back-to-the-land  movement  under  the  influence 
of  which  some  people  moved  from  city  to  country. 
Among  all  the  agencies  which  acted  to  bring  country  and 
city  into  closer  connection  the  automobile  was  the  most 
powerful.  One  of  the  most  interesting  developments  of 
the  social  and  economic  life  of  the  nation  was  the  extensive 
purchase  of  automobiles  by  farmers.  All  of  these  in- 
novations— the  rural  telephone,  rural  free  delivery  of  mail, 
parcel  post,  better  schools,  and  the  automobile — relieved 
rural  life  of  some  of  its  monotony  and  made  farm  dwellers 
more  contented  and  prosperous. 

Destruction  of  Natural  Resources.  During  the  early 
years  of  the  twentieth  century  the  American  people  came 
to  realize  that  the  enormous  increase  of  production  in 
manufacturing,  mining  and  lumbering  industries  was  being 
purchased  at  the  cost  of  an  extremely  rapid  destruction  of 
the  natural  resources  of  the  United  States.  When  in 
1870  coal  production  amounted  to  only  thirty  million 
tons  a  year  the  coal  resources  of  the  United  States  appeared 


ECONOMIC  PROGRESS,  1897-1914         555 

to  be  virtually  inexhaustible,  but  when  thirty  years  later 
production  reached  three  hundred  million  tons  a  year,  with 
each  succeeding  year  showing  a  larger  and  larger  output, 
it  became  obvious  that  the  time  would  eventually  come, 
and  at  no  distant  date,  when  all  the  coal  of  the  nation  would 
be  gone.  The  virtual  exhaustion  of  several  petroleum  and 
natural  gas  districts  in  the  Central  and  Eastern  States 
showed  that  some  of  the  natural  resources  which  had  been 
considered  inexhaustible,  were  so  limited  in  quantity  that, 
unless  the  rate  of  consumption  should  be  diminished,  they 
would  disappear  in  less  than  a  half  century.  To  the  set- 
tler who  landed  on  the  forbidding  shores  of  New  England 
in  the  seventeenth  century  the  huge  pine  forests  appeared 
to  be  impenetrable.  At  the  beginning  of  the  twentieth 
century  New  England's  chief  forest  resources  were  gone, 
a  large  part  of  the  white  pine  belt  of  the  lakes  had  been 
cut  over,  and  the  exploitation  of  other  timber  resources 
was  proceeding  with  a  rapidity  which  indicated  that  if  no 
precautionary  measures  were  taken  the  complete  disap- 
pearance of  the  great  forest  resources  of  America  was  a 
matter  of  a  comparatively  few  years.  "What  was  even  more 
significant  than  the  disappearance  of  forest  and  mineral 
resources  was  the  fact  that  the  amount  of  agricultural  land 
in  the  United  States  available  for  settlement  was  rapidly 
decreasing,  and  moreover  much  of  the  land  which  had 
long  been  occupied  was  losing  its  productivity. 

Wasteful  Methods  of  Production.  The  most  disturbing 
feature  of  the  exploitation  of  natural  resources  in  the 
United  States  was  the  sinful  waste  with  which  it  was  ac- 
complished. In  the  race  for  wealth  and  power  there  had 
been  no  effort  to  economize  and  few  attempts  to  replace 
what  had  been  destroyed.  The  prevailing  methods  of  con- 
verting bituminous  coal  into  coke  were  such  as  to  cause 
the  loss  of  more  than  one-half  the  substance  of  the  coal. 
Piles  of  refuse  accumulated  near  the  anthracite  collieries 


556  ECONOMIC  PROGRESS,  1897-1914 

of  Pennsylvania  contained  thousands  of  tons  of  coal  dis- 
carded as  worthless.  In  newly  developed  oil  fields  it  fre- 
quently happened  that  millions  of  gallons  of  petroleum 
were  lost  because  of  the  lack  of  storage  facilities.  Natural 
gas,  the  cheapest  and  cleanest  of  nature 's  fuels,  was  wasted 
in  a  wantonly  reckless  manner.  Flowing  wells  were  ignited 
and  permitted  to  burn  for  days,  and  the  methods  employed 
in  burning  gas  in  many  factories  and  homes  were  such  that 
as  much  fuel  was  wasted  as  utilized.  Forests  were  cut 
down  and  half  the  timber  wasted.  Millions  of  cubic  feet 
of  fertile  soil  were  washed  into  rivers  to  clog  the  channels 
or  be  swept  out  to  sea  because  no  effort  was  made  to  prevent 
the  erosion  which  came  as  a  result  of  deforestation  or 
because  of  a  lack  of  artificial  drainage.  In  many  agri- 
cultural regions  farming  was  conducted  like  mining.  The 
land  was  cropped  again  and  again  until  its  fertility  was 
destroyed  and  then  it  was  abandoned.  It  seemed  that  no 
thought  whatever  was  given  to  the  needs  of  future  gener- 
ations. 

The  Conservation  Movement.  During  the  latter  part  of 
the  nineteenth  century  various  government  agencies  and  a 
number  of  public-spirited  individuals  called  attention  to 
the  lavish  use  of  the  nation's  resources,  and  a  few  attempts 
were  made  to  secure  greater  economy.  The  Bureau  of  the 
Census  in  1870  warned  the  nation  that  the  forests  were 
being  depleted  with  no  provision  for  replacement.  A  law 
was  passed  in  1873  providing  for  grants  of  land  to  in- 
dividuals who  would  undertake  reforestation  work,  but 
the  law  was  of  little  benefit.  It  was  repealed  in  1891,  and 
another  law  enacted  empowering  the  President  to  establish 
national  forest  reserves  in  the  public  domain.  Presidents 
Harrison  and  Cleveland  established  a  few  reservations, 
the  total  area  set  aside  by  their  orders  amounting  to  about 
18,000,000  acres.  In  1897  a  law  w-as  enacted  providing 
for  the  administration   of  the   forest   reserves.     The   fol- 


ECONOMIC  PROGRESS,  1897-1914.  557 

lowing  year  the  Division  of  Forestry  of  the  Department  of 
Agriculture  assumed  the  duty  of  supervision  of  the  national 
forest  reserves,  protecting  the  timber  lands  against  .fire, 
selling  timber,  reforesting,  and  leasing  grazing  privileges. 
Laws  were  passed  in  1877  and  1894  to  encourage  the  rec- 
lamation of  arid  lands  in  the  West  by  private  and  State 
enterprise.  In  1889  the  Department  of  Agriculture  was 
raised  to  the  rank  of  an  executive  department,  after  which 
larger  sums  were  appropriated  each  year  to  carry  on  the 
scientific  study  of  agricultural  problems. 

None  of  the  legislation  enacted  in  the  nineteenth  century 
had  much  immediate  effect  in  checking  the  destruction  of 
natural  resources.  It  was  not  until  President  Roosevelt 
championed  the  conservation  movement  that  the  people 
really  began  to  understand  what  would  happen  if  the 
reckless  and  lavish  use  of  the  nation's  wealth  was  not  ended. 
Among  the  many  services  which  President  Roosevelt 
rendered  his  country  none  was  of  greater  value  than  his 
taking  an  aggressive  stand  for  the  conservation  of  natural 
resources.  He  did  not  originate  the  conservation  move- 
ment, but  he  gave  it  vitality  and  strength.  Credit  for 
starting  the  movement  belongs  chiefly  to  Gifford  Pinchot, 
who  was  head  of  the  Forest  Service  during  President 
Roosevelt's  administration.  It  was  he  who  first  called 
President  Roosevelt's  attention  to  the  imperative  need  of 
taking  steps  to  prevent  the  total  destruction  of  the  resources 
of  the  country.  In  response  to  Mr.  Pinchot 's  suggestion 
President  Roosevelt  appointed  a  Public  Lands  Commission 
in  1903  to  undertake  a  study  of  the  conditions  of  the  public 
domain.  In  1907  he  appointed  an  Inland  Waterways  Com- 
mission, and  the  following  year  he  called  the  famous  "Con- 
ference of  Governors"  at  the  White  House,  to  which  he 
invited  the  governors  of  all  the  States,  the  members  of 
Congress,  the  justices  of  the  Supreme  Court,  the  Cabinet 
and  the  Inland  Waterways  Commission.     In  a  speech  to 


558 


ECONOMIC  PROGRESS,  1897-1914 


this  Conference  he  outlined  fully  the  problem  of  conser- 
vation and  urged  the  cooperation  of  State  and  Federal 
agencies  in  carrying  out  a  program  to  protect  the  vanishing 
resources  of  America.  ''Any  right-thinking  father,"  he 
said,  "earnestly  desires  and  strives  to  leave  his  son  both 
an  untarnished  name  and  a  reasonable  equipment  for  the 
struggle  of  life.  So  this  nation  as  a  whole  should  earnestly 
desire  and  strive  to  leave  the  next  generation  the  national 
honor  unstained  and  the  national  resources  unexhausted." 
He  divided  the  natural  resources  into  two  classes,  those  not 
capable  of  renewal  and  those  which   could  be  renewed. 


Old-Fashioned  Coke  Ovens 
Courtesy  of  the  Barrett  Companj/. 


"In  dealing  with  the  coal,  the  oil,  the  gas,  the  iron,  the 
metals  generally,"  he  said,  "all  that  we  can  do  is  to  try  to 
see  that  they  are  wisely  used.  The  exhaustion  is  certain 
to  come  in  time.  The  second  class  of  resources  consists  of 
those  which  can  not  onlj^  be  used  in  such  a  manner  as  to 
leave  them  undiminished,  but  can  actually  be  improved  by 
wise  use.  The  soil,  the  forests,  the  waterways,  come  in  this 
category."  As  a  result  of  this  Conference  of  Governors 
conservation  commissions  were  appointed  in  forty  States. 
President  Roosevelt  named  a  National  Conservation  Com- 
mission which  in  1909  submitted  to  Congress  an  instructive 
report,  which  described  the  natural  resources  of  the  United 


ECONOMIC  PROGRESS,  1897-1914         559 

States,  showed  how  they  were  being  wasted,  and  outlined 
a  policy  of  conservation. 

During  his  term  of  office  President  Roosevelt  added 
150,000,000  acres  to  the  national  forest  reserves.  On  his 
recommendation  Congress  enlarged  the  duties  and  powers 
of  the  Forest  Service  in  1905.  As  Chief  Forester,  Gifford 
Pinchot  performed  invaluable  service  in  organizing  and  ex- 
ecuting the  work  of  forest  preservation.  President  Roose- 
velt thwarted  the  efforts  of  certain  greedy  private  interests 
to  monopolize  the  water-power  sites  in  the  public  domain, 
holding  that  such  sites  should  be  leased  for  a  definite  term, 
of  years  and  not  be  alienated  from  the  public  to  which 
they  of  right  belonged.  He  was  instrumental  in  securing 
the  passage  of  the  Reclamation  Act  of  1902  under  which 
the  Federal  Government  assumed  the  task  of  constructing 
irrigation  works  for  the  reclamation  of  large  areas  of  arid 
land.  Under  this  law  a  number  of  great  irrigation  projects 
were  undertaken  in  the  West,  among  the  more  important 
being  the  Salt  River  project  in  Arizona  and  the  Truckee- 
Carson  project  in  Nevada.  To  awaken  an  interest  in  the 
problem  of  agricultural  development  President  Roosevelt 
appointed  the  Country  Life  Commission  in  1908.  This 
commission  made  a  report  the  following  year,  dealing  with 
the  social  aspects  of  rural  life  and  pointing  out  ways 
in  which  rural  living  conditions  could  be  improved. 

While  President  Roosevelt's  successor  did  not  abandon 
the  national  conservation  work  his  policy  was  not  so  ener- 
getic as  many  people  desired.  Chief  Forester  Pinchot  at- 
tacked the  public  land  policy  of  the  Secretary  of  Interior 
and  precipitated  a  controversy  which  resulted  in  a  Congres- 
sional inquiry.  Mr.  Pinchot  was  forced  to  resign  for  insub- 
ordination, but  his  actions  were  generally  sustained  by 
public  opinion.  One  of  the  leading  causes  of  the  repudi- 
ation of  President  Taft's  leadership  by  a  large  section  of 


560 


ECONOMIC  PROGRESS,  1897-1914 


the  Republican  Party  in  1912  was  his  failure  to  carry  out 
the  Roosevelt  conservation  policies. 

The  conservation  movement  had  far  reaching  effects. 
Laws  for  the  protection  of  natural  resources  were  passed 
in  many  States.  Congress  began  to  consider  the  question 
of  what  methods  should  be  adopted  to  bring  about  the  wise 
use  of  the  great  stores  of  natural  wealth  in  the  public 
domain,  though  no  legislation  of  importance  on  this  subject 
was  enacted  until  the  passage  of  the  act  for  leasing  water- 
power  sites  in  1920.     The  conservation   movement   stim- 


By-Product  Coke  Ovens  at  Joliet,  111. 
Courtesy  of  the  Barrett  Company. 

ulated  the  study  by  both  private  and  public  agencies  of 
how  best  to  utilize  the  resources  the  consumption  of  which 
was  necessary.  More  economical  methods  of  coal  mining 
were  introduced ;  the  bee-hive  coke  ovens  gave  way  in 
many  places  to  by-product  ovens,  making  it  possible  to  save 
the  ammonia,  acids  and  coal  tar  with  their  many  deriva- 
tives, which  previously  had  been  wasted ;  more  efficient 
methods  of  refining  petroleum  increased  the  variety,  quan- 
tity and  quality  of  petroleum  products.  The  possibility  of 
the  complete  disappearance  of  coal  and  petroleum  stimu- 


ECONOMIC  PROGRESS,  1897-1914  561 

lated  a  greater  use  of  water-power  as  a  source  of  industrial 
energy.  A  halt  was  called  upon  the  extravagantly  wasteful 
methods  of  lumbering,  and  the  reforestation  of  denuded 
areas  was  undertaken  by  private  and  public  agencies.  The 
ruthless  destruction  of  all  forms  of  wild  animal  life  was 
checked.  Not  only  were  additional  steps  taken  to  protect 
existing  fishing  resources,  but  there  was  a  greater  activity 
in  replenishing  and  increasing  the  stocks  of  useful  salt- 
water and  fresh-water  fish. 

In  no  field  was  the  effect  of  the  conservation  movement 
more  striking  than  in  agriculture.  Federal  and  State  ex- 
periment stations  increased  in  number,  agricultural  schools 
broadened  the  scope  of  their  work,  and  the  scientific  study 
of  agricultural  problems  was  generally  encouraged,  with 
the  result  tha,t  many  important  discoveries  were  made 
which  increased  the  productivity  of  the  soil.  Proper  ro- 
tation of  crops,  improved  methods  of  fertilizing  and  culti- 
vating the  soil,  selection  of  seed,  live-stock  breeding,  the 
introduction  of  new  farm  products,  dry-farming  on  semi- 
arid  lands,  ways  of  exterminating  harmful  insects  and 
vermin — all  these  subjects  received  intensive  study. 

Closely  connected  with  the  movement  for  the  conservation 
of  natural  resources  was  the  movement  for  protecting 
human  health  and  life.  The  report  of  the  National  Con- 
servation Commission  contained  a  section  dealing  wnth  the 
problem  of  conserving  the  life  and  vitality  of  the  people. 
Human  efficiency  is  far  more  important  than  machine  effi- 
ciency. Legislation  for  the  abolition  of  child  labor  and 
for  the  protection  of  adult  workers  was  an  integral  part  of 
the  conservation  movement.  Improved  sanitation  and  bet- 
ter housing  in  urban  and  rural  communities,  the  prolon- 
gation of  life  through  the  cure  and  the  prevention  of  dis- 
ease, the  reduction  of  infant  mortality,  the  improvement  of 
diet  both  b}'  the  wiser  selection  and  by  the  better  prepara- 
tion of  food — problems  such  as  these  challanged  public  in- 


562 


ECONOMIC  PROGRESS,  1897-1914i 


terest,  and  a  wider  realization  of  their  significance  was 
proof  of  a  marked  change  for  the  better  in  the  economic  and 
moral  life  of  the  nation. 

Steam    Railroad    Transportation.     The    depression    of 


ECONOMIC  PROGRESS,  1897-1914  563 

1893-94  brought  to  an  end  the  great  period  of  railway 
construction  which  began  about  1880,  When  the  depres- 
sion ended  construction  was  resumed,  but  not  with  the 
feverish  activity  which  characterized  railroad  building  in 
former  years.  By  1893  the  country  was  fairly  well  sup- 
plied with  trunk  line  railroads,  and  after  that  time  rail- 
road financiers  were  interested  chiefly  in  the  creation  of 
great  "systems"  by  the  consolidation  of  existing  lines 
and  by  the  construction  of  connecting  lines,  branch  lines 
and  feeders.  From  1897  to  1914  an  annual  average  ad- 
dition of  about  4,000  miles  was  made  to  the  railroad  net 
of  the  country,  the  most  active  year  of  construction  being 
1904,  when  6,690  miles  of  new  line  were  built.  In  1914 
the  mileage  of  the  railway  net  of  the  United  States  was 
263,547. 

These  years  witnessed  great  improvements  in  the  equip- 
ment of  railroads.  An  important  step  in  the  promotion 
of  the  safety  of  passenger  travel  came  with  the  substitution 
of  steel  for  wood  in  the  construction  of  passenger  cars, 
while  the  comfort  of  travel  was  increased  by  the  use  of 
electric  car  lighting  systems  and  better  methods  of  car 
heating.  Freight  carrying  equipment  was  likewise  greatly 
improved.  Box  cars,  built  with  steel  underframes  or  built 
entirely  of  steel  with  a  capicity  of  40  to  50  tons  became 
common,  and  steel  gondola  cars  capable  of  carrying  60  to 
75  tons  of  coal  or  ore  were  built  in  large  numbers.  The 
standard  equipment  of  both  freight  and  passenger  cars 
included  automatic  safety  couplers  and  air  brakes.  Heav- 
ier, faster*  and  more  powerful  locomotives  were  designed 
to  haul  the  growing  tr-affic  of  the  railroads ;  and  to  sustain 
the  weight  of  the  heavy  equipment  steel  rails  of  greater 
weight  and  durability  were  employed.  Many  railroads 
installed  automatic  block  signals  on  their  main  line  tracks 
and  interlocking  plants  at  crossings  and  in  terminals  to  in- 
sure a  greater  degree  of  safety  in  train  operation. 


564         ECONOMIC  PROGRESS,  1897-1914* 

Electric  Railways.  The  construction  of  the  first  suc- 
cessful electric  street  railway  in  Richmond  in  1888  was 
followed  by  the  adoption  of  electric  traction  on  street  rail- 
ways in  virtually  all  the  cities  of  the  country.  In  the 
large  cities  where  elevated  railways  had  been  built  to  pro- 
vide a  means,  of  local  transportation  of  greater  rapidity 
than  could  be  given  on  surface  lines  steam  wa^  generally 
replaced  by  electric  power.  In  a  few  large  cities,  partic- 
ularly in  New  York  and  Boston,  the  elevated  and  surface 


Electrification  on  the  New  York,  New  Haven  and  Hartford 
Railroad.     Overhead  Transmission. 
Courtesy  of  the  Westinghouse  Electric  and  Manufacturing  Company. 

lines  together  failing  to  afford  sufficient  transit  facilities  to 
meet  the  needs  of  a  growing  population,  extensive  programs 
of  subway  construction  were  planned  and  executed.  In 
New  York  the  subway  system  extended  under  the  East 
River  to  the  borough  of  Brooklyn.  Jersey  City,  Hoboken 
and  Newark  were  connected  with  Manhattan  Island  by 
electric  railways  passing  through  great  tubes  bored  beneath 
the  bed  of  the  Hudson  River. 

Electric  traction  was  employed  not  only  on  city  rapid 
transit  lines  but  on  railways  extending  between  cities.     In 


ECONOMIC  PROGRESS,  1897-1914 


565 


the  Eastern  States  many  of  the  interurban  electric  lines 
were  merely  continuations  of  city  surface  lines,  built  along 
the  side  of  public  highways,  but  in  the  Central  States,  in  the 
Pacific  States  and  in  some  Eastern  States  electric  inter- 
urban railways  were  constructed  just  as  steam  railroads  are 
constructed,  with  private  rights  of  way  and  heavily  bal- 
lasted tracks,  carrying  cars  which  move  as  rapidly  as  the 
passenger  trains  of  steam  roads. 

Electrification  of  Steam  Railroads.     Electricity  is  gen- 
erally conceded  to  be  much  superior  to  steam  as  a  source 


Pennsylvania  Eailroad  Train  Emerginjj  on  Manhattan  Island 
from  Tunnel  under  the  Hudson  River 
Courtesy  of  the  Wetitinghouse  Electric  arul  Manufacturint/  Company. 

of  motive  power  in  railroad  transportation,  not  only  from 
the  standpoint  of  cleanliness  and  flexibility,  but  because  it 
offers  certain  operating  advantages.  Electric  locomotives, 
having  no  fires  to  clean  or  boilers  to  fill,  are  ready  for  ser- 
vice a  greater  part  of  the  time  than  steam  locomotives; 
they  are  economical  in  that  they  consume  no  fuel  while 
standing  still  (some  electric  locomotives  even  generate 
power  on  descending  grades)  ;  they  can  exert  their  maxi- 
mum tractive  effort  at  all  times,  while  it  is  virtually 
impossible  to  prevent  the  steam  pressure  of  a  steam  locomo- 


566         ECONOMIC  PROGRESS,  1897-1914 

tive  from  decreasing  during  a  pull  up  a  long  hill.  The 
chief  obstacle  to  the  general  replacement  of  steam  by 
electric  power  has  been  the  great  cost  which  it  would 
involve  to  build  power  houses,  to  construct  electric  loco- 
motives and  to  install  equipment  for  the  generation  and 
transmission  of  current.  But  while  the  general  adoption 
of  electric  power  in  railroad  transportation  has  not  been 
feasible  its  advantages  in  certain  branches  of  the  service 
are  so  great  that  its  substitution  for  steam  in  several  places 
has  been  a  matter  of  necessity. 

The  greater  cleanliness  of  electric  trains  and  the  greater 
flexibility  of  electric  power  as  compared  with  steam  make 
the  use  of  electric  traction  particularly  desirable  on  roads 
which  carry  large  numbers  of  suburban  dwellers  to  and 
from  their  work  in  large  cities.  In  the  freight  and  pas- 
senger terminals  of  cities,  where  traffic  is  dense  and  trains 
numerous,  electric  power  is  vastly  superior  to  steam  power. 
Electricity  is  also  better  than  steam  for  transportation 
through  long  tunnels  and  subways.  On  heavy  mountain 
grades,  particularly  in  regions  where  coal  is  scarce  and 
dear  and  sources  of  hydro-electric  power  fairly  abundant 
the  use  of  electric  power  is  desirable.  In  all  these  branches 
of  steam  railroad  service,  tunnel  and  terminal  work,  sub- 
urban service,  and  mountain  service,  electric  traction  be- 
gan to  be  extensively  used  during  the  early  years  of  the 
twentieth  century. 

To  both  the  great  New  York  passenger  stations,  the 
Grand  Central  and  the  Pennsylvania,  underground  elec- 
trified tracks  were  constructed,  the  Pennsylvania  tracks 
lying  in  a  great  double  tunnel  built  from  New  Jersey  be- 
neath the  Hudson  River,  Manhattan  Island  and  East  River 
to  Long  Island.  Electric  suburban  service  was  installed 
by  steam  roads  of  New  York,  Philadelphia  and  a  number  of 
other  eastern  cities.  The  most  notable  project  of  electrifi- 
cation of  the  mountain  divisions  of  steam  roads  was  that 


ECONOMIC  PROGRESS,  1897-1914 


567 


undertaken  by  the  Chicago,   Milwaukee  and  St.  Paul  in 
Montana  and  Idaho.     The  electrification  of  the  Elkhom 


j  Loading  Coal  at  Cleveland 

Courtesy  of  Cleveland  Chamber  of  Commerce. 

grade  of  the  Norfolk  and  Western  Railroad  was  carried  out 
to  secure  greater  economy  in  the  transportation  of  a  heavy 
coal  traffic. 


Unloading  Coal  at  Duluth 
Courtesy  of  Commercial  Club  of  Duluth. 

Highway    Improvement.     Tliroughoiit    the    nineteenth 
century  the  people  of  the  United  States  were  backward  in 


568         ECONOMIC  PROGRESS,  1897-1914 

the  development  of  their  highways.  Private  turnpike 
companies  and  local  and  State  Governments  did  much  to 
improve  roads,  but  it  cannot  be  said  that  highway  con- 
struction kept  pace  with  the  development  of  industry  in 
general.  In  1890  a ' '  Good  Roads  Movement ' '  was  launched 
by  a  National  Good  Roads  Association  organized  in  Chicago 
to  promote  greater  activity  in  highway  improvement,  with 
the  result  that  a  great  deal  more  interest  was  taken  in  the 
highway  problem.     In  a  number  of  States  the  enactment 


Loading  Ore  at  Duluth 
Courtesy  of  Commercial  Club  of  Duluth. 

of  progressive  highway  legislation  was  obtained  despite  the 
deep  aversion  to  taxation  which  has  always  been  character- 
istic of  the  American  people. 

The  coming  of  the  automobile  into  general  use  did  more 
than  anything  else  however  to  emphasize  the  need  for 
better  roads,  and  as  the  automobile  was  employed  more  and 
more  in  the  transportation  of  persons  and  commodities 
there  was  greater  and  greater  activity  in  building  new  and 
better  highways.  Direct  expenditures  of  State  govern- 
ments for  highway  construction  and  maintenance  in  1913 


ECONOMIC  PROGRESS,  1897-1914 


569 


reached  the  respectable  total  of  $37,000,000  while  the 
amount  expended  by  county  and  township  governments  was 
$137,000,000.  The  Federal  Government  responded  to  the 
need  for  better  roads  in  1916  by  appropriating  $75,000,000 
to  be  distributed  among  the  States  for  highway  construction. 
Only  those  States  which  agreed  to  spend  a  sum  equal  to  that 
allotted  by  the  Federal  Government  were  entitled  to  share 
in  the  appropriation. 

Waterways.  The  decline  of  inland  water  transporta- 
tion, which  began  after  the  Civil  War,  continued  unabated 
throughout  the  remainder  of  the  nineteenth  century. 
Rivers  and  canals   were   unable   to   compete  successfully 


^^Brmm^^hjiM'yMM 

^s^ 

1 

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^i 

Unloading  Ore  at  Cleveland 

Courtesy  of  Cleveland  Chamber  of  Commerce. 

with  railroads.  Even  the  ocean  coastwise  trade,  which 
during  the  first  half  of  the  century  had  been  by  far  the 
most  important  part  of  the  nation's  domestic  commerce, 
failed  to  develop  at  a  rate  commensurate  with  the  general 
expansion  of  trade  and  industry.  Only  on  the  Great  Lakes 
did  water  transportation  show  a  substantial  growth.  The 
decay  of  water  transportation  was  due  in  part  to  the  unfair 
competitive  methods  of  rail  carriers.  River  and  canal 
transportation  was  frequently  destroyed  by  unfair  com- 
petition. The  coastwise  trade  was  checked  because  rail- 
road interests  bought  up  the  leading  coastwise  steamship 
lines,  then  failed  to  develop  the  business  themselves  and 


570 


ECONOMIC  PROGRESS,  1897-1914 


frustrated  any  attempts  that  were  made  to  establish  com- 
petitive service.     Even  the  important  steamship  lines  oper- 


Old  and  New  Locks  of  the  New  York  Canal  System 
atate  Engineer  and  Surveyor's  Department 

ating  on  the  Great  Lakes  were  absorbed  by  rail  carriers. 

Railway  traffic  grew  so  rapidly  that  car  shortages  and 
railroad  congestion  came  with  unwelcome  frequency.     It 


Modern  Barge  on  the  New  York  Barge  Canal 
State    Engineer   and   Surveyor's    Department 

became  apparent  to  many  people  that  the  time  was  coming 
when  the  density  of  freight  traffic  in  the  United  States 


ECONOMIC  PROGRESS,  1897-1914         571 

would  be  so  great  that  it  might  be  a  matter  of  economy  to 
utilize  the  long  neglected  waterways  for  carrying  a  part 
of  the  nation's  commerce  rather  than  to  try  to  construct 
additional  railroad  facilities.  There  was  a  widespread  re- 
newal of  interest  in  the  possibilities  of  water  transportation. 
The  Federal  Government  appropriated  large  sums  for  the 
improvement  of  rivers  and  harbors.  The  appropriation 
for  river  improvement  were  spent  in  deepening  the  channels 
of  certain  streams  and  in  constructing  dams,  locks  and 
jetties.     The  Ohio,  the  Mississippi,  the  Hudson  and  the 


A  Modern  Grain  Elevator,  Buffalo 
Courtesy  of  Buffalo  Chamber  of  Commerce. 

Columbia  rivers  were  among  the  more  important  streams  to 
receive  the  benefit  of  Federal  appropriations.  Two  new 
locks  were  built  in  the  St.  Mary's  River  at  the  entrance  to 
Lake  Superior,  and  a  number  of  intracoastal  waterways 
were  constructed  along  the  Gulf  and  Atlantic  coasts. 

Of  projects  of  waterway  improvement  undertaken  by 
agencies  other  than  the  Federal  Government  the  Cape  Cod 
Canal  and  the  New  York  Barge  Canal  were  the  most  im- 
portant. The  Cape  Cod  Canal,  which  was  opened  in 
July,  1914,  was  constructed  between  Buzzard's  Bay  and 
Cape  Cod  Bay  by  a   private  corporation.     It   shortened 


572         ECONOMIC  PROGRESS,  1897-1914 

the  all-water  distance  between  Boston  and  New  York  by 
70  miles  and  afforded  a  route  for  vessels  that  was  much 
safer  than  the  frequently  dangerous  passage  around  Cape 
Cod.  In  1903  the  people  of  the  State  of  New  York  author- 
ized the  construction  of  a  barge  canal  from  the  Hudson 
River  at  Waterford  to  Lake  Erie  at  Buffalo  to  take  the 
place  of  the  famous  old  Erie  Canal  which  had  long  ceased 
to  have  much  value  as  a  commercial  highway.  The  new 
canal,  which  was  opened  to  traffic  throughout  its  length  in 
1918,  was  constructed  to  accommodate  barges  of  a  thousand 


Grain  Elevators  at  BufTalo 
Courtesy  of  Buffalo  Chamber  of  Commerce. 

tons  capacity.  The  tow  path  and  mule-power  gave  way  to 
steam  tugs.  The  construction  of  this  waterway,  with  its 
electrically  operated  locks,  its  dams  and  gates  to  control 
the  water  level,  its  terminal  facilities  at  important  shipping 
points  from  New  York  City  to  Buffalo,  was  an  engineering 
feat  of  great  magnitude.  The  canal  was  built  not  only  to 
afford  a  transportation  route  across  the  State  but  to  make 
available  for  use  various  sources  of  hydroelectric  power. 

In  an  effort  to  prevent  the  suppression  of  water  trans- 
portation by  selfish  railroad  interests  Congress  provided  in 


ECONOMIC  PROGRESS,  1897-1914  573 

the  Panama  Canal  Act  of  1912  that  no  railroad  corporation 
should  be  permitted  to  operate  competing  vessels  through 
the  Panama  Canal,  nor  to  operate  competing  vessels  on  any 
other  water  route  except  with  the  consent  of  the  Interstate 
Commerce  Commission.  The  Commission  was  authorized  to 
determine  whether  competition  existed  and  to  decide 
whether  a  continuance  of  railroad  ownership  would  be  in 
the  public  interest.  Under  this  law  the  Commission  or- 
dered the  railroads  to  surrender  their  control  of  competing 
vessels  on  the  Great  Lakes  and  on  a  few  other  water  routes. 
The  Panama  Canal.  On  August  15,  1914,  the  Panama 
Canal  was  opened  to  traffic.  This  important  waterway  was 
constructed  by  the  Federal  Government,  the  work  beginning 
in  1904.  From  the  time  of  the  Mexican  War,  when  the 
United  States  secured  possession  of  California,  the  con- 
struction of  a  canal  across  the  isthmus  connecting  the  two 
American  continents  was  an  object  of  deep  interest  to  the 
people  of  the  United  States,  not  only  because  such  a  water- 
way promised  commercial  advantages  of  exceptional  value, 
but  because  it  promised  to  be  an  important  addition  to  the 
military  and  naval  strength  of  the  nation.  Though  the 
United  States  negotiated  treaties  and  conventions  with 
New  Granada  (Colombia)  and  Great  Britain  before  1850, 
with  a  view  to  making  arrangements  for  the  construction 
of  an  isthmian  waterway,  no  decisive  step  in  the  matter 
was  taken  for  many  years.  In  1879  a  French  corporation 
was  organized  by  Ferdinand  de  Lesseps,  who  had  planned 
and  carried  out  the  building  of  the  Suez  Canal,  to  under- 
take the  construction  of  a  canal  across  the  Isthmus  of 
Panama.  The  company  began  excavation  in  1883  and 
carried  on  the  work  until  1889,  when  it  became  bankrupt 
and  dissolved.  A  new  company  was  organized  to  go  on  with 
the  project  but  it  failed  to  make  any  material  progress.  In 
1895  President  Cleveland  appointed  a  Nicaragua  Canal 
Board  to  investigate  and  report  upon  the  cost  of  construe- 


574  ECONOMIC  PROGRESS,  1897-1914 

ting  a  canal  across  Nicaragua.  This  board  was  succeeded 
in  1897  by  the  Nicaragua  Canal  Commission  which  in  turn 
was  replaced  two  years  later  by  the  Isthmian  Canal  Com- 
mission. The  new  Commission  was  directed  to  investigate 
all  practicable  routes  for  an  inter-oceanic  canal,  and  par- 
ticularly the  routes  known  as  the  Nicaragua  and  the 
Panama  routes.  In  1901  the  Commission  recommended 
that  the  Nicaragua  route  be  chosen,  but  when  the  following 
year  the  Government  reached  an  agreement  with  the  French 
canal  company  for  the  acquisition  of  its  property  and 
franchises,  the  Commission  filed  a  supplementary  report 
recommending  the  Panama  route  as  the  most  "practicable 
and  feasible  route." 

The  United  States  Government  negotiated  a  treaty  with 
Colombia  to  secure  rights  to  a  canal  zone  across  the 
isthmus.  The  treaty  was  ratified  by  the  United  States 
Senate  in  1903,  but  the  Colombian  Government  rejected 
it.  The  people  of  the  state  of  Panama,  indignant  at  the 
action  of  the  Colombian  Government,  revolted  and  estab- 
lished a  republic.  President  Roosevelt  promptly  recognized 
the  new  republic,  and  a  treaty  was  soon  negotiated  under 
which  the  United  States  obtained  the  rights  deemed  nec- 
essary for  the  construction  of  the  canal. 

A  problem  which  had  to  be  solved  before  work  could  be 
conducted  on  a  large  scale  was  the  sanitation  of  the  canal 
zone.  Dr.  William  C.  Gorgas,  a  colonel  in  the  regular 
army,  was  appointed  sanitary  officer,  and  under  his  capable 
administration  yellow  fever  in  Panama  was  stamped  out 
and  the  isthmus  made  one  of  the  most  healthful  regions 
in  the  tropics. 

For  three  years  the  work  on  the  canal  proceeded  slowly, 
chiefly  because  of  administrative  difficulties.  In  1907  the 
Commission  in  charge  of  construction  was  reorganized, 
with  army  officers  in  the  majority.  Col.  George  W. 
Goethals  was  appointed  chairmen  of  the  Commission  and 


ECONOMIC  PROGRESS,  1897-1914  575 

Chief  Engineer,  and  given  charge  of  the  entire  project. 
Under  his  able  management  and  direction  an  organization 
was  formed  which  carried  the  work  to  rapid  completion. 
The  cost  of  the  canal  was  approximately  $400,000,000. 

It  is  too  early  yet  to  tell  exactly  what  the  economic  and 
commercial  influence  of  the  canal  is  to  be.  It  unquestion- 
ably affords  a  cheaper  and  more  efficient  transportation 
route  between  the  east  and  west  coasts  of  the  United  States 
and  should  promote  the  growth  of  a  large  intercoastal  do- 
mestic trade.  It  shortens  greatly  the  sailing  time  between 
the  east  coast  of  the  United  States  and  the  west  coast  of 
South  America,  gives  to  the  Atlantic  ports  of  the  United 
States  a  shorter  and  more  direct  route  to  many  parts  of  the 
Orient,  and  brings  the  west  coast  of  the  United  States  closer 
to  western  Europe.  While  the  World  War  was  in  progress 
the  canal  was  used  but  little  by.  commercial  vessels,  all 
possible  effort  being  made  to  divert  shipping  to  service  be- 
tween America  and  Europe.  Since  the  return  of  peace 
traffic  through  the  canal  has  been  steadily  growing,  and 
there  seems  little  doubt  that  the  waterway  will  become  an 
important  factor  in  American  trade. 

The  Panama  Canal  Tolls  Controversy.  The  Hay- 
Pauncefote  treaty,  negotiated  between  the  United  States 
and  Great  Britain  in  1901,  stipulated  that  if  the  United 
States  should  build  an  isthmian  canal,  the  waterway  should, 
when  completed,  be  open  to  the  vessels  of  all  nations  without 
discrimination  in  charges.  Notwithstanding  this  treaty, 
Congress,  acting  upon  the  theory  that  the  treaty  did  not 
apply  to  the  shipping  of  the  United  States,  included 
in  the  Panama  Canal  Act  of  1912  a  clause  exempting  the 
coastwise  shipping  of  this  country  from  the  payment  of 
canal  tolls.  The  British  Government  protested  that  the 
exemption  was  a  violation  of  the  treaty.  Accepting  the 
British  interpretation  of  the  treaty — an  interpretation 
which  the  leading  authorities  on  international  law  in  the 


576  ECONOMIC  PROGRESS,  1897-1914 

United  States  and  in  Europe  asserted  to  be  correct — Presi- 
dent "Wilson  appeared  before  Congress  on  March  5,  1914, 
and  asked  for  the  repeal  of  the  exemption.  Though  the 
Democratic  Party  platform  of  1912  had  indorsed  the  ex- 
emption feature  of  the  Panama  Canal  Act  the  President 
secured  the  support  of  a  suflScient  number  of  his  party  to 
bring  about  the  repeal  which  he  requested.  The  repealing 
act  contained  a  proviso  however  which  reserved  any  right 
which  the  United  States  might  have  under  the  treaty  to 
exempt  American  vessels  from  the  payment  of  tolls,  thus 
making  it  possible  for  a  future  Congress  to  insist  upon  a 
different  interpretation  of  the  treaty. 

Foreign  Trade  and  Shipping.  The  foreign  commerce 
of  the  United  States  'had  a  wonderful  growth  between  1897 
and  1914,  exports  of  domestic  merchandise  rising  in  value 
from  $1,032,007,603  to  .$2,329,684,025,  and  imports  from 
$616,049,654  to  $1,893,925,657.  The  most  significant 
change  in  the  character  of  the  export  trade  has  already  been 
pointed  out,  namely  the  continual  increase  in  the  pro- 
portion of  manufactured  goods  and  the  decline  in  the  pro- 
portion of  foodstuffs.  Cotton  continued  to  be  the  leading 
single  export.  With  the  growth  of  domestic  manufacturing 
industries  the  relative  position  of  raw  materials  in  the  im- 
port trade  tended  to  improve  and  the  percentage  of  manu- 
factured goods  in  the  total  imports  declined.  Increased  ex- 
ports of  finished  manufactures  and  increased  imports  of 
raw  material  signified  a  steady  development  of  commerce 
with  the  non-industrial  portions  of  the  world  in  North 
America,  South  America,  Asia  and  Africa. 

Notwithstanding  the  expansion  of  foreign  trade  between 
1897  and  1914  the  American  merchant  marine  made  little 
progress.  In  1898  the  tonnage  of  American  vessels  regis- 
tered in  foreign  trade  was  726,213,  the  lowest  it  had  fallen 
since  1840.  The  same  causes  which  began  to  act  immedi- 
ately after  the  Civil  War  to  discourage  the  shipping  indus- 


ECONOMIC  PROGRESS,  1897-1914  577 

try  in  the  United  States — high  cost  of  ship  construction, 
high  operating  costs,  and  the  investment  of  capital  in  inter- 
nal enterprises — continued  to  prevent  the  revival  of  the  mer- 
chant marine.  With  the  rise  of  a  large  export  trade  in 
manufactured  goods  the  lack  of  a  merchant  marine  was 
keenly  felt  by  American  business  interests.  The  service 
from  American  ports  to  those  parts  of  the  world  which 
sought  foreign  manufactures  in  large  quantities  was  not  so 
good  as  the  service  from  European  countries  whose  exports 
competed  with  those  of  America.  It  was  not  an  uncommon 
occurrence  for  travelers  who  desired  to  go  from  the  United 
States  to  Brazil,  for  instance,  to  make  the  journey  by  way 
of  England.  Without  adequate  shipping  service  American 
exporters  were  at  a  disadvantage  in  the  competitive  struggle 
with  foreign  rivals. 

Efforts  were  made  in  Congress  from  time  to  time  to 
secure  the  enactment  of  measures  to  encourage  the  ship- 
ping business.  Several  attempts  were  made  to  pass  subsidy 
laws,  the  most  notable  effort  coming  in  1901  when  a 
general  subsidy  to  virtually  all  branches  of  the  shipping 
business  was  proposed.  The  bill  failed  to  pass  however, 
and  the  recommendations  made  by  the  Merchant  Marine 
Commission  a  few  years  later,  that  a  subsidy  policy  be  adop- 
ted, likewise  failed  to  produce  effective  action.  In  1912 
Congress  modified  the  shipping  policy  of  the  country  to  the 
extent  of  permitting  the  registry  under  the  American  flag 
of  foreign  vessels  not  more  than  five  years  old.  The  fol- 
lowing year  Congress  made  a  further  effort  to  encourage 
the  shipping  industry  by  including  in  the  Underwood 
Tariff  Law  a  section  stipulating  that  "a  discount  of  5  per 
cent  on  all  duties  imposed  by  this  act  shall  be  allowed  on 
such  goods,  wares,  and  merchandise  as  shall  be  imported  in 
vessels  admitted  to  registration  under  the  laws  of  the 
United  States."  There  was  a  proviso  h'jwever  that  noth- 
ing in  the  section  should  be  construed  as  abrogating  or 


578  ECONOMIC  PROGRESS,  1897-1914 

impairing  any  commercial  treaty  to  which  the  United  States 
was  a  party.  The  courts  declared  that  the  proposed  dis- 
crimination violated  the  many  reciprocity  treaties  which 
the  American  Government  had  negotiated  with  foreign 
Governments,  and  the  discount  was  not  permitted. 

Under  the  provision  of  the  shipping  legislation  of  1912 
a  few  foreign  built  vessels  were  registered  under  the  Amer- 
ican flag,  but  even  with  these  additions  the  total  tonnage 
of  American  vessels  engaged  in  foreign  trade  was  only  a 
little  more  than  a  million  tons.  The  coming  of  the  Euro- 
pean war  in  1914  brought  the  shipping  problem  to  a  crisis. 
How  the  problem  was  dealt  with  will  be  considered  in  the 
following  chapter. 

The  Banking  and  Currency  Problem.  It  was  told  in  a 
previous  chapter  that  little  was  done  at  the  close  of  the 
free-silver  agitation  to  improve  the  condition  of  the  nation's 
currency.  It  took  another  panic  to  stimulate  activity.  It 
was  a  well  known  fact  that  the  financial  crises  from  which 
the  American  people  had  suffered  were  of  much  greater 
severity  than  might  have  been  the  case  had  the  country 
possessed  a  better  currency  system.  The  chief  defect  of  the 
currency  was  its  "inelasticity."  The  amount  of  currency 
in  existence  could  not  be  readily  increased  or  reduced  when 
the  need  for  expansion  or  reduction  came.  This  inelasticity 
was  the  underlying  cause  of  "panic"  during  an  industrial 
or  commercial  crisis.  As  has  been  explained  before  a  com- 
mercial crisis  comes  at  the  end  of  a  period  of  credit  ex- 
pansion ;  it  is  due  to  the  fact  that  many  people  have  gone  in- 
to debt  and  at  the  time  of  maturity  of  their  obligations  they 
are  unable  to  pay.  When  a  commercial  reaction  sets  in 
creditors  press  their  debtors  for  immediate  settlement. 
The  amount  of  debts — or  of  credits — in  the  business  world 
at  any  time  is  vastly  in  excess  of  the  quantity  of  money  in 
circulation,  and  with  everybody  seeking  money  to  settle 
his  obligations,  unless  there  is  some  method  by  which  the 


ECONOMIC  PROGRESS,  1897-1914  579 

quantity  of  currency  can  be  temporarily  increased,  debtors 
find  themselves  in  a  precarious  situation.  Banks  can  not 
pay  their  depositors  because  the  banks  themselves  can  not 
collect  all  their  loans.  The  inability  of  debtors  to  obtain 
money  and  the  pressing  need  for  it  tend  to  create  a  panic, 
just  as  a  panic  may  occur  on  a  sinking  ship  when  the  time 
in  which  to  reach  the  life-rafts  is  too  short  for  all  to  be 
accommodated  in  an  orderly  manner. 

Under  such  conditions  the  business  men  who  are  actually 
solvent  may  suffer  just  as  severely  as  those  who  have  made 
unwise  investments  or  have  indulged  in  excessive  specu- 
lation. With  everybody  trying  to  meet  his  obligations 
property  and  securities  are  dumped  on  the  market  indis- 
criminately and  prices  come  tumbling  down.  The  interest 
rate  shoots  upward.  Bank  depositors  who  are  unable  to 
get  funds  from  their  banks  trj'  to  buy  currency  at  a  pre- 
mium with  certified  checks.  The  wheels  of  business  re- 
fuse to  turn. 

When  conditions  arise  that  point  to  the  approach  of  a 
panic  an  elastic  currency  system  will  save  many  solvent 
business  interests.  They  can  deposit  their  notes,  drafts, 
and  other  bills  receivable  with  the  currency  issuing  agency 
and  get  the  cash  necessary  to  meet  their  obligations.  When 
the  crisis  subsides  and  business  becomes  normal  the  ob- 
ligations back  of  the  extra  currency  may  be  redeemed  and 
the  quantity  of  currency  reduced  to  the  amount  necessary 
for  normal  business  operations. 

The  currency  of  the  United  States,  previous  to  1914,  did 
not  have  this  element  of  elasticity.  The  quantity  of  gold 
in  the  country  changed  according  to  the  character  of  inter- 
national dealings;  the  amount  of  greenbacks  and  silver 
certificates  remained  virtually  stationary ;  the  amount  of 
national  bank  notes  outstanding  fluctuated  but  little.  The 
bank  notes  were  the  only  part  of  the  currency  which  could 
possibly  have  elasticity,  but  inasmuch  as  the  notes  were 


580  ECONOMIC  PROGRESS,  1897-1914. 

issued  upon  the  security  of  Government  bonds  the  quantity 
in  'Circulation  at  any  time  was  limited  to  the  amount  of 
bonds  in  existence  which  had  the  "circulation  privilege," 
The  process  of  retiring  the  bank-notes  or  of  issuing  them 
was  not  a  process  that  responded  to  commercial  needs.  The 
currency  system  was  therefore  not  only  of  such  a  nature 
that  it  could  afford  little  relief  when  financial  crises  de- 
veloped, but  it  did  not  respond  to  the  needs  of  the  nation's 
business  under  normal  conditions.  In  the  ordinary  course 
of  trade  the  demand  for  currency  in  different  parts  of  the 
country  fluctuates  from  season  to  season.  During  the  crop 
moving  season  the  wheat  belt  needs  a  large  supply  of 
currency;  during  other  seasons  the  needs  of  the  wheat 
belt  for  currency  are  not  so  great.  Under  former  condi- 
tions its  demand  during  the  crop  moving  season  could  not 
be  met  by  a  temporary  increase  in  the  supply  of  currency, 
and  it  was  necessary  for  the  banks  in  the  wheat  belt  to  call 
back  whatever  deposits  they  had  made  in  eastern  cities. 
This  often  made  it  necessary  for  the  eastern  banks  to  con- 
tract their  loans,  and  money  became  "tight"  until  the  crop 
movement  was  over  and  deposits  again  flowed  from  the 
interior  to  the  eastern  cities. 

The  banking  system  was  of  such  a  character  as  to  cause 
the  curtailment  of  credit  when  panic  conditions  approached, 
when  the  most  necessary  thing  to  save  the  situation  was 
the  free  extension  of  credit.  The  "country  banks"  kept 
their  idle  funds  on  deposit  in  the  large  cities,  particularly 
in  New  York.  When  these  deposits  piled  up  the  "easy 
money"  served  to  encourage  speculative  activity  in  the 
stock  market,  thus  producing  the  conditions  which  often 
caused  financial  crises.  When  a  crisis  began  to  develop 
and  individual  bank  depositors  clamored  for  funds,  the 
country  banks  hurriedly  sought  to  withdraw  their  deposits 
from  New  York  and  other  cities.     This  only  made  a  bad 


ECONOMIC  PROGRESS,  1897-1914  581 

situation  much  worse  by  hurrying  the  process  of  liquidation 
and  causing  a  greater  contraction  of  credit. 

The  McKinley  administration,  which  went  into  office  on 
a  sound  money  platform,  did  little  with  the  currency 
problem  except  maintain  the  gold  standard  and  enact  legis- 
lation to  extend  the  life  of  the  national  bank-note  currency. 
The  bonds  which  secured  the  bank-notes  outstanding  at 
the  close  of  the  nineteenth  century  nearly  all  were  issued 
to  reach  maturity  before  1909,  and  if  the  Government  re- 
deemed them  as  they  fell  due  it  meant  that  the  bank-note 
currency  must  be  retired.  In  order  to  prevent  this  from 
happening,  Congress  enacted  a  measure  on  March  14,  1900, 
providing  that  the  bonds  maturing  in  1904,  1907  and  1908 
should  be  refunded  into  thirty  year  bonds,  bearing  interest 
at  the  rate  of  2  per  cent  and  having  the  circulation  priv- 
ilege. This  act  reversed  the  policy  which  the  Government 
had  always  followed,  of  paying  its  interest-bearing  debt 
as  soon  as  possible.  It  seemed  to  be  a  confession  that  the 
Government  had  to  be  in  debt  in  order  for  the  country  to 
have  a  sufficient  quantity  of  money.  Though  the  rate  of 
interest  on  the  new  bonds  was  very  low,  the  postponement 
of  the  payment  of  the  debt  made  the  burden  of  the  tax- 
payers actually  greater. 

The  Panic  of  1907.  The  defects  of  the  banking  and 
currency  system  were  once  more  brought  to  the  attention 
of  the  public  in  a  forcible  manner  in  1907,  when  a  sharp 
financial  crisis  overtook  the  country.  Speculation  had  been 
exceedingly  active  for  several  years ;  the  combination  move- 
ment and  its  resulting  overcapitalization  of  business  enter- 
prises had  brought  about  the  sale  of  many  securities  at 
prices  much  in  excess  of  their  real  value.  The  day  of  reck- 
oning had  to  come,  and  when  it  came  the  banking  and 
currency  system  functioned  as  it  had  done  before  in  1873 
and  1894.     On  October  24  it  was   impossible  to  borrow 


582  ECONOMIC  PROGRESS,  1897-1914 

money  in  New  York.  Interior  banks  tried  to  withdraw 
their  funds  from  the  New  York  banks.  Depositors  began 
a  run  on  several  financial  institutions,  and  one,  the  Knicker- 
bocker Trust  Company,  was  forced  to  close  its  doors.  Cur- 
rency went  to  a  premium  early  in  November.  The  weaker 
banks  of  New  York  were  saved  only  through  the  aid  of 
the  strong  banks  which  held  exceptionally  large  cash  re- 
serves. To  enable  the  strong  banks  to  help  the  weaker  ones 
and  at  the  same  time  protect  themselves  against  danger  of 
loss  "clearing-house  certificates"  were  issued,  a  device  that 
had  been  tried  successfully  in  two  previous  panics.  Any 
bank  could  deposit  bills  receivable  or  other  securities  with 
the  clearing  house  and  receive  in  exchange  "certificates" 
for  75  per  cent  of  the  par  value  of  the  securities  deposited. 
It  was  agreed  that  all  banks  would  accept  these  certificates 
in  place  of  cash  in  the  settlement  of  balances  at  the  Clear- 
ing House.  Thus  if  Bank  A  cashed  checks  drawn  upon 
Bank  B,  it  would  accept  from  Bank  B  these  certificates  in- 
stead of  currency.  Thus  the  reserves  of  all  the  banks  were 
pooled  as  it  were,  and  the  weaker  banks  were  able  to  weather 
the  storm.  These  clearing-house  certificates  were  in  the 
nature  of  currency.  Had  there  been  an  elastic  currency 
system  their  use  would  have  been  unnecessary. 

In  other  large  cities  clearing-house  certificates  were  used 
to  help  banks  through  the  crisis;  many  banks  placed  an 
arbitrary  limit  upon  the  amount  of  currency  which  they 
would  permit  their  depositors  to  withdraw  each  week;  in 
some  places  manufacturers  who  were  unable  to  get  currency 
for  their  payrolls  issued  small  certificates  which  local  store- 
keepers agreed  to  accept  in  place  of  cash.  Industry  and 
trade  were  crippled  for  several  weeks  solely  because  of  a 
defective  currency  system. 

The  Emergency  Currency  Law.  The  difficulties  of  1907 
stirred  Congress  to  action,  and  in  1908  the  Aldrich-Vree- 
land   Emergency    Currency   Law   was   passed.     This   act 


ECONOMIC  PROGRESS,  1897-1914  583 

provided  that  national  banks  might  secure  additional  ciren- 
lating  currency  in  time  of  emergency  by  the  deposit  of 
commercial  paper  and  securities  with  a  "national  currency 
association,"  to  be  held  in  trust  for  the  United  States.  The 
emergency  currency  thus  provided  for  was  similar  in  most 
respects  to  the  clearing-house  certificates  except  that  it  was 
issued  by  the  Government. 

This  law  was  only  an  emergency  measure,  and  it  did 
nothing  to  give  to  the  country  a  currency  which  would 
fluctuate  in  volume  from  season  to  season  according  to  com- 
mercial needs.  As  a  step  in  the  direction  of  revising  com- 
pletely the  currency  system  the  law  provided  for  the  ap- 
pointment of  a  National  Monetary  Commission  to  be  com- 
posed of  members  of  the  two  branches  of  Congress.  The 
Commission  was  directed  to  investigate  the  currency  prob- 
lem and  report  to  Congress  what  changes  were  thought  to 
be  desirable  in  the  currency  and  banking  system  of  the 
United  States.  The  Commission's  work  was  completed  in 
1912.  Its  report  contained  an  exhaustive  description  and 
history  of  the  currency  and  banking  systems  of  the  leading 
countries  of  the  world.  It  recommended  the  establishment 
under  a  Federal  charter  of  a  great  central  reserve  bank 
with  15  district  branches,  to  be  owned  and  controlled  by 
subscribing  banks.  It  recommended  the  adoption  of  an 
elastic  asset  currency.  The  chief  popular  objection  to  the 
plan  was  that  it  gave  private  banking  interests  instead  of 
the  Government  control  of  the  currency  system.  The  re- 
port came  too  late  for  legislative  action  during  President 
Taft's  administration,  and  currency  legislation  was  there- 
fore postponed  until  after  President  Wilson  and  the  Demo- 
cratic Party  came  into  power. 

The  Federal  Reserve  System.  On  June  23,  1913,  while 
the  House  of  Representives  was  waiting  for  the  Senate  to 
finish  its  consideration  of  the  tariff  bill  President  Wilson 
appeared   before   Congress  and  urged  the   enactment   of 


584  ECONOMIC  PROGRESS,  1897-1914 

currency  legislation.  "One  of  the  chief  things  business 
needs  now  and  will  need  increasingly  as  it  grows  in  scope 
and  vigor  in  the  years  immediately  ahead  of  us,"  he  said, 
**is  the  proper  means  by  which  readily  to  vitalize  its  credits, 
corporate  and  individual,  and  its  originative  brains.  .  .  . 
"The  principles  on  which  we  should  act  are  also 
clear.  .  .  .  We  must  have  a  currency,  not  rigid  as  now, 
but  readily,  elastically  responsive  to  sound  credit,  the 
expanding  and  contracting  credits  of  everyday  transactions, 
the  normal  ebb  and  flow  of  personal  and  corporate  dealings. 
Our  banking  laws  must  mobilize  reserves,  must  not  permit 


the  concentration  anywhere  in  a  few  banks  of  the  monetary 
resources  of  the  country,  or  their  use  for  speculative  pur- 
poses in  such  volume  as  to  hinder  or  impede  or  stand  in  the 
way  of  other  more  legitimate  and  fruitful  uses.  And  the 
control  of  the  new  system  of  banking  and  issue  which  our 
new  laws  are  to  set  up  must  be  public,  not  private,  must 
be  vested  in  the  Government  itself.  ..." 

The  Federal  Reserve  Act,  which  was  approved  December 
23,  1913,  embodied  all  the  principles  outlined  by  President 
Wilson.  It  is  by  far  the  most  important  financial  measure 
ever  passed  by  Congress  and  it  takes  high  rank  among  all 


ECONOMIC  PROGRESS,  1897-1914  585 

the  constructive  measures  ever  formulated  at  Washington. 
It  has  given  to  the  United  States  a  currency  system  which 
an  extremely  difficult  test  has  proved  to  be  perhaps  the  most 
admirable  currency  system  possessed  by  any  country  in  the 
world.  Though  the  majority  of  the  bankers  of  the  country 
waged  bitter  warfare  against  the  bill  when  in  the  course  of 
passage,  they  have  now  come  to  give  the  act  their  unqual- 
ified approval. 

The  law  created  first  of  all  a  Federal  Reserve  Board  con- 
sisting of  five  appointed  members  and  two  ex-officio  mem- 
bers, the  Secretary  of  the  Treasury  and  the  Comptroller 
of  the  Currency.  This  board  is  charged  with  the  general 
administration  of  the  Federal  Reserve  System.  Under  the 
terms  of  the  act  the  country  has  been  divided  into  12  dis- 
tricts or  regions,  and  a  city  has  been  selected  in  each  region 
for  the  location  of  a  regional  Federal  Reserve  Bank.  The 
cities  having  the  regional  banks  are  Boston,  New  York, 
Philadelphia,  Richmond,  Atlanta,  Cleveland,  Chicago, 
Minneapolis,  St.  Louis,  Kansas  City,  Dallas  and  San  Fran- 
cisco. Each  regional  bank  is  the  central  bank  of  its  dis- 
trict; all  the  national  banks  in  the  district  are  "member 
banks,"  and  state  banks  too  are  permitted  under  certain 
conditions  to  become  members  of  the  system.  Each  mem- 
ber bank  subscribes  to  the  capital  stock  of  the  regional  bank 
of  its  district  and  is  required  to  keep  a  part  of  its  reserves 
in  the  regional  bank.  The  regional  banks  do  no  business 
with  the  public  aside  from  the  purchase  and  sale  of  gold. 
Government  bonds,  and  certain  forms  of  bills  of  exchange. 
They  are  the  banks  of  the  member  banks.  Each  regional 
bank  has  nine  directors,  six  elected  by  the  member  banks 
and  three  named  by  the  Federal  Reserve  Board. 

Each  regional  bank  may  rediscount  the  notes,  bills  and 
other  commercial  paper  of  its  member  banks.  In  this  way 
the  banking  resources  of  a  district  may  be  mobilized  so  that 
surplus  funds  in  one  part  of  the  district  may  be  used  to 


586  ECONOMIC  PROGRESS,  1897-1914 

finance  the  business  operations  of  another  part  of  the  dis- 
trict. At  the  direction  of  the  Federal  Reserve  Board  one 
regional  bank  may  rediscount  the  commercial  paper  of 
another  regional  bank,  so  that  the  resources  of  the  entire 
system  may  be  mobilized  where  needed.  The  regional 
banks  are  the  fiscal  agents  of  the  Government. 

Provision  is  made  for  currency  elasticity  through  the 
issue  of  Federal  Reserve  notes.  Should  the  demand  for 
currency  in  any  district  exceed  the  available  supply  the 
Federal  Reserve  Bank  may  exchange  some  of  its  redis- 
counted  paper  for  these  notes.  One  of  the  three  directors 
of  a  Federal  Reserve  Bank  appointed  by  the  Federal  Re- 
serve Board  is  designated  as  a  Federal  Reserve  Agent. 
Should  the  regional  bank  desire  currency  it  places  some  of 
its  commercial  paper  in  the  hands  of  its  Federal  Reserve 
Agent  and  sets  aside  a  sum  of  gold  equal  to  40  per  cent  of 
the  amount  of  Federal  Reserve  notes  requested.  The  Fed- 
eral Reserve  Agent  then  gives  the  notes  to  the  bank  and 
holds  in  trust  for  the  Government  the  commercial  paper 
against  which  the  notes  are  issued.  The  notes  are  obliga- 
tions of  the  Government  and  are  redeemable  in  gold  at  the 
Treasury  in  Washington.  When  business  slackens  and  bor- 
rowers settle  their  accounts  the  notes  come  back  to  the  re- 
gional banks  and  may  be  withdrawn  from  circulation.  The 
Federal  Reserve  Board  may  suspend  the  reserve  require- 
ments of  the  law,  but  should  the  gold  reserve  behind  the 
notes  of  a  regional  bank  at  any  time  fall  below  40  per  cent,  a 
tax  is  imposed  upon  the  bank,  which  the  bank  adds  to  its  re- 
discount rate.  The  purpose  of  the  tax  is  to  check  undue  in- 
flation of  credit  and  prevent  excessive  currency  expansion. 
The  Federal  Reserve  Board  has  the  power  to  determine  in 
a  general  way  the  character  of  the  commercial  paper  which 
may  be  used  as  a  basis  for  currency  issue.  The  paper  must 
consist  of  bills,  notes  and  drafts  arising  out  of  actual  com- 
mercial transactions,  and  it  must  not  includie  notes  drawn 


ECONOMIC  PROGRESS,  189^-1914  587 

for  the  purpose  of  carrying  on  trading  in  stocks,  bonds,  or 
other  investment  securities  except  the  bonds  and  notes  of 
the  Government. 

Though  the  Federal  Reserve  System  can  not  prevent  the 
occurrence  of  industrial  and  commerical  depressions — no 
currency  and  banking  system  can  do  that — it  can  save  the 
conservative  business  interests  from  those  losses  which  they 
have  heretofore  been  compelled  to  suifer  because  of  "pan- 
ics." It  can  adjust  the  volume  of  currency  to  the  chang- 
ing needs  of  the  country  throughout  the  year,  and  it  can 
in  times  of  emergency  supply  the  currency  necessary  to 
prevent  wholesale  financial  disaster  to  the  business  interests 
of  the  nation. 

The  Federal  Farm  Land  Bank  System.  The  program 
of  banking  legislation  of  the  Wilson  administration  was 
rounded  out  in  1916  by  the  enactment  of  the  Federal  Farm 
Land  Bank  Act.  Before  the  passage  of  this  law  there  was 
no  machinery  to  provide  agricultural  interests  with  ade- 
quate long-term  credits.  The  farmer  needs  long-time 
credit,  and  he  is  unable  to  secure  it  at  the  ordinary  com- 
mercial bank.  A  bank  must  keep  its  assets  in  a  form  that 
can  be  converted  into  cash  on  short  notice.  Farm  mort- 
gages are  often  difficult  to  sell  and  a  bank  which  has  its 
funds  tied  up  largely  in  farm  mortgages  might  find  it 
difficult  to  meet  the  demands  of  its  depositors. 

The  Federal  Farm  Land  Bank  System  is  patterned  after 
the  Federal  Reserve  System.  It  is  supervised  by  a  Fed- 
eral Farm  Loan  Board.  The  country  is  divided  into  twelve 
districts,  each  district  containing  a  Federal  Farm  Land 
Bank.  Farm  Loan  Associations  are  organized  in  each  dis- 
trict. These  associations  are  made  up  of  farmers  who  de- 
sire to  borrow  money  on  the  security  of  farm  mortgages. 
A  farmer  desiring  to  make  a  loan  gives  a  mortgage  to  the 
association.  The  association  turns  the  mortgages  received 
over  to  its  Farm  Land  Bank,  accepting  in  exchange  money 


588  ECONOMIC  PROGRESS,  1897-1914 

to  be  advanced  to  the  farmers  who  execute  the  mortgages. 
A  Farm  Land  Bank  may  deposit  its  mortgages  with  an 
agent  designated  by  the  Farm  Loan  Board,  and  it  may  then 
issue  bonds  to  an  amount  equivalent  to  the  mortgages.  It 
sells  the  bonds  to  the  public.  The  money  obtained  from 
the  sale  of  bonds  may  be  used  to  buy  more  mortgages  from 
Farm  Loan  Associations,  and  the  process  repeated  until  the 
outstanding  bonds  of  the  Farm  Land  Bank  amount  to 
twenty  times  its  capital.  Under  this  system  the  loanable 
funds  of  the  public  become  readily  available  for  the  use  of 
the  farmers.  The  rate  of  interest  which  the  farmers  pay 
is  lower  than  the  rate  they  would  have  to  pay  when  bor- 
rowing from  an  ordinary  commercial  bank,  and  the  con- 
ditions for  the  redemption  of  mortgages  are  exceedingly 
liberal.  The  Federal  Farm  Land  Bank  System  is  designed 
to  give  the  farming  interests  credit  facilities  equal  to 
those  afforded  by  the  Federal  Reserve  System  to  manu- 
facturers and  merchants. 

The  Industrial  Relations  Commission.  In  June,  1913, 
President  Wilson  sent  to  the  Senate  his  nominations  for 
the  Industrial  Relations  Commission  which  had  been  created 
by  an  act  of  Congress  the  previous  August.  The  nom- 
inations were  confirmed  in  September,  and  the  Commission 
organized  and  began  its  inquiry  into  the  labor  problem. 
Its  work  was  completed  in  1915.  The  representatives  of 
labor  and  capital  were  unable  to  reach  an  agreement  either 
as  to  the  causes  of  industrial  unrest  or  as  to  recommenda- 
tions for  legislative  action.  The  report  of  the  labor  group, 
outlining  certain  causes  of  industrial  discontent,  created 
much  comment,  adverse  or  favorable  as  a  rule  accord- 
ing to  the  prejudices  of  the  commentators.  The  Com- 
mission's work  did  not  result  in  the  adoption  of  any  pro- 
gram of  Federal  labor  legislation.  The  war  in  Europe  for 
the  time  being  forced  into  the  background  the  question  of 
formulating  a  new  industrial  policy. 


^  ECONOMIC  PROGRESS,  1897-1914  589 

Questions  and  Topics 

1.  What  effect  has  the  World  War  had  upon  immigration 
to  the  United  States? 

2.  Do  you  know  of  any  factories  in  which  electric  motors 
have  displaced  the  steam  engine? 

3.  Are  you  familiar  with  any  recently  adopted  practical 
projects  of  conservation? 

4.  What  has  been  the  effect  of  the  automobile  upon  the 
passenger  business  of  interurban  electric  railways? 

5.  Congress  is  now  considering  the  advisability  of  the  con- 
struction, in  cooperation  with  Canada,  of  a  waterway 
through  which  ocean  vessels  may  enter  and  leave  the  Great 
Lakes  by  way  of  the  St.  Lawrence  River.  Do  you  think 
such  a  waterway  should  be  constructed  ?    Why  ? 

6.  What  are  the  chief  features  of  the  highway  laws  of 
your  own  State? 

7.  How  do  Federal  Reserve  notes  differ  from  the  national 
bank  notes?    from  the  greenbacks? 


CHAPTER  XXVII 
ECONOMIC  ASPECTS  OF  THE  WORLD  WAR 

The  European  War.  On  July  28,  1914,  Austria  de- 
clared war  on  the  little  kingdom  of  Serbia  because  the  Ser- 
bian Government  refused  to  accede  to  humiliating  terms  of 
an  ultimatum  which  the  Austrian  Government  delivered  as 
a  result  of  the  murder  of  the  heir  of  the  Austrian  throne 
by  a  Serbian  fanatic.  Russia  made  ready  to  prevent  the 
annihilation  of  Serbia,  and  on  August  1  the  Imperial 
Government  of  Germany  jarred  the  world  by  declaring 
war  on  Russia.  France  and  England  were  drawn  into 
the  struggle  almost  immediately,  France  by  virtue  of  her 
alliance  with  Russia,  and  England  because  of  Germany's 
wanton  invasion  of  peaceful  Belgium.  The  mighty 
struggle,  in  preparation  for  which  Europe  had  for  a  gen- 
eration been  taking  on  more  and  more  the  appearance  of 
a  vast  armed  camp,  had  begun. 

The  war  brought  a  complete  transformation  in  the  eco- 
nomic outlook.  It  meant  the  diversion  of  millions  of  men 
from  peaceful  pursuits  to  military  service  and  other  war 
activities;  it  meant  the  sudden  termination  of  trade  re- 
lations between  the  belligerent  countries.  The  necessity 
for  complete  economic  readjustment  in  the  countries  taking 
an  active  part  in  the  great  conflict  caused  an  abrupt  dis- 
turbance of  commercial  relations  with  all  neutral  countries. 
The  first  effect  of  the  war  was  a  sharp  financial  crisis  over 
the  entire  commercial  world.  Creditors  hurried  to  seek 
cover,  demanding  immediate  settlement  of  all  current  ob- 
ligations; investors,  fearful  of  the  ruin  and  devastation  of 

590 


THE  WORLD  WAR  591 

war,  tried  to  turn  their  securities  into  gold.  The  credit 
structure  which  supported  the  commercial  operations  of 
the  world  began  to  totter.  Only  heroic  measures  averted 
unprecedented  disaster.  In  virtually  all  European  coun- 
tries moratoria  were  declared,  relieving  debtors  for  the 
time  being  from  the  necessity  of  meeting  their  obligations. 
In  the  United  States  the  New  York  Stock  Exchange  and 
all  other  stock  exchanges  of  any  importance  were  closed 
for  several  weeks,  bringing  trade  in  securities  to  an  end. 
European  business  interests,  particularly  the  business  in- 
terests of  England,  that  had  funds  due  from  the  United 
States,  demanded  gold,  and  foreign  exchange  in  New  York 
rose  to  a  high  level.  The  demands  upon  banks  through- 
out the  country  became  unusually  heavy.  The  Federal  Re- 
serve System  not  having  yet  been  put  into  operation,  it 
became  necessary  for  banking  interests  to  resort  to  the 
Issue  of  emergency  currency  under  the  terms  of  the  Aldrich- 
Vreeland  Act  of  1908.  Almost  $400,000,000  of  emergency 
currency  was  issued,  and  the  crisis  passed  without  the  de- 
velopment of  a  ''panic."  Gradually  there  was  a  transition 
from  peace  conditions  to  war  conditions,  and  the  credit 
structure  adjusted  itself  to  the  new  economic  situation 
created  by  the  fundamental  changes  in  the  production, 
sale  and  consumption  of  economic  goods. 

Effects  of  the  European  War  upon  American  Con^merce. 
Though  the  United  States  did  not  become  an  active 
participant  in  the  war  until  1917,  the  conflict  neverthe- 
less had  a  pronounced  effect  upon  American  industry 
and  trade.  The  struggle  caused  immediate  changes  in  the 
character  of  American  foreign  commerce,  and  out  of  these 
changes  came  important  modifications  of  domestic  eco- 
nomic conditions.  British  naval  supremacy  became  in- 
stantly manifest  in  the  disappearance  of  German  merchant 
shipping  from  the  high  seas.  The  British  Government 
declared  a  blockade  of  the  German  coast,  and  direct  trade 


592  THE  WORLD  WAR 

between  Germany  and  the  United  States  soon  came  to  an 
end.  Moreover  England  took  steps  to  prevent  Germany's 
carrying  on  external  commerce  through  the  ports  of  ad- 
joining neutral  European  countries.  The  sale  of  Amer- 
ican goods  to  Germany  was  stopped  and  likewise  the  sale 
of  German  merchandise  to  the  United  States.  The  loss  of 
German  markets  for  American  exports  was  offset  however 
by  an  immediate  increase  in  exports  to  other  European 
markets.  All  the  nations  of  Western  Europe  had  been 
accustomed  to  derive  a  large  part  of  their  food  supplies 
from  Russia.  The  entrance  of  Turkey  into  the  war  shut 
off  the  Russian  grain  trade,  with  the  result  that  there  was 
a  greatly  increased  European  demand  for  American  food- 
stuffs. Moreover  the  transfer  of  a  large  portion  of  the 
working  population  of  the  countries  allied  against  Ger- 
many to  military  service  made  it  necessary  for  those  coun- 
tries to  buy  in  the  United  States  and  elsewhere  a  part  of 
the  foodstuffs  which  they  ordinarily  would  have  produced 
themselves.  In  addition  to  purchasing  foodstuffs  in  the 
United  States  the  allied  nations  bought  in  this  country 
large  quantities  of  horses,  vehicles,  metal  products  and 
raw  materials,  which  could  be  used  for  military  purposes, 
and  they  also  entered  into  contracts  with  American  manu- 
facturers for  the  production  of  munitions — explosives,  pro- 
jectiles, cannon,  and  small  arms. 

American  Export  Trade,  1915-1917.  The  exports  of  the 
United  States  for  the  fiscal  year  of  1915  were  larger  than 
those  for  the  previous  year,  notwithstanding  the  fact  that 
trade  with  Germany  came  to  a  virtual  end  shortly  after  the 
war  started.  The  exports  of  munitions  during  this  year 
were  comparatively  small  because  it  took  some  time  for 
production  to  be  established  on  a  large  scale.  There  w-as  a 
notable  increase  however  in  the  exports  of  foodstuffs,  of 
war  supplies  for  which  facilities  for  production  already 
existed,   such   as    automobiles,    barbed-wire,    surgical   ap- 


THE  WORLD  WAR  593 

paratus,  hospital  supplies,  leather  goods,  and  horseshoes,  and 
of  ]?aw  materials  for  munition  factories,  such  as  zinc,  brass, 
steel  rods  and  billets  and  metal-working  machinery.  Ex- 
ports of  cotton  declined  as  well  as  exports  of  agricultural 
implements,  fertilizer  and  lumber.  By  the  end  of  1915 
American  munition  factories — dozens  of  which  were  built 
after  the  war  began — were  turning  out  their  wares  in  large 
quantities.  The  exports  of  munitions  for  the  fiscal  year 
of  1916  were  valued  at  $481,000,000,  more  than  nine  times 
the  value  of  munitions  exported  in  1915.  The  exports  of 
raw  materials  for  the  production  of  munitions  in  foreign 
factories  were  also  large,  and  there  was  an  increase  in  the 
exports  of  foodstuffs,  iron  and  steel  products,  leather,  and 
other  war  supplies.  The  total  value  of  American  exports 
for  1916  was  $4,272,397,774.  The  following  year  it  was 
some  two  billion  dollars  more.  Shipments  of  munitions  and 
materials  for  munitions  in  1917  were  twice  the  value  of 
the  shipments  of  1916,  and  there  was  a  large  increase  in 
the  value  of  foodstuffs  exported.  A  substantial  rise  in 
prices  accounted  in  part  for  the  great  increase  in  the  value 
of  exports,  but  the  increase  in  the  quantity  of  goods  sold 
was  by  no  means  a  negligible  factor. 

Import  Trade.  The  value  of  the  merchandise  imports 
of  the  United  States  in  1915  was  some  two  hundred  million 
dollars  less  than  the  value  of  imports  for  the  preceding 
year,  but  in  1916  and  in  1917  there  was  a  large  increase 
in  the  value  of  imports,  the  total  for  1917  amounting  to 
$2,659,355,185,  Here  too  the  increase  was  due  in  part 
to  the  rise  of  prices.  The  actual  quantity  of  goods  pur- 
chased from  Great  Britain  declined,  while  the  imports  from 
nearly  all  other  European  countries  tended  to  fall  off  both 
in  quantity  and  value.  The  most  important  change  in  the 
character  of  the  import  trade  was  the  large  increase  iu 
the  quantity  of  raw  materials  purchased  from  South  Amer- 
rea  and  the  Orient.     Finished  manufactures  occupied  a 


594  THE  WORLD  WAR 

place  of  lessening  importance  in  the  import  trade.  The 
factories  and  the  factory  workers  of  Europe  were  turned 
to  other  uses  than  producing  for  the  markets  of  the  United 
States,  and  this  country  not  only  produced  a  larger  pro- 
portion of  the  manufactured  goods  consumed  at  home  but 
took  a  large  part  in  supplying  those  markets  which  had 
formerly  depended  chiefly  upon  European  mills. 

A  Creditor  Nation.  The  increase  in  the  value  of  Ameri- 
can imports  was  much  less  than  the  increase  in  the  value 
of  exports,  and  each  year  of  the  war  showed  a  rapidly 
mounting  balance  of  trade  in  favor  of  this  country.  For 
many  years  before  the  war  the  United  States  had  been  a 
debtor  nation.  A  large  excess  of  exports  over  imports 
had  been  necessary  to  meet  the  interest  charges  on  foreign 
investments  in  America  and  to  pay  other  foreign  obliga- 
tions such  as  transportation  charges  and  tourists'  expenses. 
It  has  been  noted  before  that  as  soon  as  the  war  broke  out 
there  was  a  heavy  export  movement  of  gold  from  the  United 
States  to  settle  current  foreign  indebtedness.  With  the 
rapid  rise  of  the  export  trade  the  outward  movement  of 
gold  was  soon  checked,  and  by  January,  1915,  the  impor- 
tation of  gold  was  under  way.  For  the  fiscal  year  of  1915 
the  net  gain  of  gold  by  the  United  States  amounted  to 
$25,344,607.  In  1916  it  was  $403,759,753,  and  in  1917 
it  was  $685,254,801.  These  imports  of  gold,  large  as  they 
were,  were  far  too  small  to  pay  off  the  obligations  contracted 
in  this  country  by  the  nations  warring  against  Germany. 
American  securities  held  by  foreign  investors  were  re- 
turned to  this  country  in  large  quantities,  but  even  the 
absorption  of  these  securities  did  not  serve  to  balance  the 
account.  Both  Great  Britain  and  France  placed  large  loans 
in  the  United  States,  thereby  establishing  the  credits  nec- 
essary to  finance  their  purchases  of  American  goods,  and 
other  European  countries  followed  a  similar  policy.  By  the 
beginning   of   1917   the   United   States   had   paid   off   all 


THE  WORLD  WAR  595 

obligations  to  the  rest  of  the  world,  had  obtained  a  large 
part  of  the  gold  supply  of  the  world,  and  was  in  possession 
of  foreign  securities  and  other  "bills  receivable"  amount- 
ing to  many  millions  of  dollars.  The  United  States  had 
become  a  creditor  nation. 

The  Shipping  Problem.  The  lack  of  a  merchant  marine 
was  a  serious  handicap  to  the  commerce  of  the  United 
States.  For  many  years  before  the  war  American  mer- 
chants had  depended  chiefly  upon  British  and  German 
shipping  for  ocean  transportation  service.  With  German 
shipping  swept  from  the  seas  and  a  large  part  of  Great 
Britain's  merchant  tonnage  devoted  to  military  use  the 
United  States  was  confronted  with  a  great  shortage  of 
shipping  facilities.  Great  Britain,  by  careful  allocation  of 
her  tonnage,  was  able  to  furnish  a  large  number  of  vessels 
to  carry  goods  from  the  United  States  to  England,  but  it 
was  extremely  difficult  for  American  merchants  to  obtain 
shipping  service  to  other  parts  of  the  world. 

Various  expedients  were  adopted  to  meet  the  immediate 
emergency.  Coastwise  and  lake  shipping  was  diverted  to 
ocean  routes,  old  vessels,  many  of  which  had  long  since 
been  abandoned  and  sent  to  the  "boneyard"  to  rot  and 
rust  away,  were  repaired,  refitted  and  put  into  service, 
and  orders  for  new  tonnage  were  placed  with  the  few  ship 
yards  in  the  country.  Vessels  in  service  were  driven  at 
top  speed  and  every  effort  made  to  reduce  the  time  spent 
in  port.  The  shortage  of  service  was  reflected  in  a  spec- 
tacular advance  in  ocean  freight  rates.  Anybody  who 
owned  a  vessel  or  had  a  vessel  under  charter  was  able  to 
make  a  profit  equal  to  the  price  of  the  vessel  in  one  or  two 
successful  voyages. 

Shipping  Legislation.  The  first  step  which  the  Govern- 
ment took  to  relieve  the  shipping  shortage  was  to  enact  a 
law  extending  the  policy  of  free  shipping  adopted  in  1912. 
By  a  law  approved  August  18,  1914,  the  requirement  that 


596  THE  WORLD  WAR 

foreign  built  ships  need  be  not  more  than  five  years  old  to 
be  admitted  to  American  registry  was  repealed,  and  Ameri- 
can registry  thrown  open  to  all  foreign  shipping.  This 
law  could  not  provide  an  increased  supply  of  shipping.  It 
could  at  best  only  serve  to  divert  to  American  registry 
the  merchant  vessels  of  other  neutral  nations.  To  the  ex- 
tent that  it  made  possible  a  restoration  of  the  services 
which  the  war  had  curtailed  or  brought  to  an  end  it  did 
however  afford  some  aid  to  American  commerce.  But  what 
was  needed  was  the  construction  of  new  tonnage. 

In  September  a  bill  was  introduced  into  Congress  pro- 
viding for  the  development  of  the  American  merchant 
marine  through  the  agency  of  the  Government.  In  effect 
the  bill  proposed  the  creation  of  a  corporation,  controlled 
by  the  Government,  which  should  own  and  operate  vessels 
in  the  forteign  trade  of  the  United  States.  The  bill  author- 
ized the  Government  to  purchase  or  construct  the  vessels 
which  should  be  operated  by  the  corporation.  The  bill 
met  with  bitter  opposition  in  Congress,  particularly  among 
those  Senators  who  favored  giving  large  subsidies  to  private 
shipping  interests.  It  finally  passed  the  House  of  Rep- 
resentatives in  amended  form  but  was  killed  in  the  Senate 
by  the  obstructive  tactics  of  its  chief  opponents. 

It  soon  became  apparent  that  Congress  had  acted  un- 
wisely in  refusing  to  pass  the  ship  purchase  bill.  General 
ship  subsidy  legislation  had  long  been  out  of  the  question 
in  the  United  States,  and  private  capitalists  displayed  no 
eagerness  to  spend  large  sums  in  the  construction  of  new 
shipyards  and  ships.  Late  in  February,  1915,  Germany 
began  her  campaign  of  unrestricted  submarine  warfare 
against  enemy  merchant  vessels,  and  in  the  course  of  a 
few  months  the  shortage  of  shipping  became  more  acute 
than  ever.  A  number  of  individuals,  both  in  and  out  of 
Congress,  who  had  opposed  the  ship  purchase  bill,  openly 


THE  WORLD  WAR  597 

expressed  regret  at  their  action  in  helping  to  bring  about 
the  defeat  of  the  measure. 

The  next  session  of  Congress  witnessed  a  renewal  of  the 
attempt  to  enact  shipping  legislation  and  after  much  delay 
and  fruitless  debate  the  Shipping  Act  was  finally  passed 
and  signed  by  President  Wilson  on  September  7,  1916. 
The  new  law  created  a  Shipping  Board,  to  which  was  given 
important  regulatory  powers  over  shipping  engaged  in 
foreign  and  domestic  trade.  The  Board  was  authorized 
to  acquire  merchant  vessels  by  construction,  lease  or  pur- 
chase, and  to  sell  or  charter  such  vessels  to  citizens  of  the 
United  States.  It  was  also  authorized  to  form  one  or  more 
corporations  with  a  capital  not  to  exceed  $50,000,000,  of 
which  the  Board  should  control  at  least  51  per  cent.  The 
corporation  was  to  have  power  to  purchase,  lease  and  oper- 
ate such  vessels  as  the  Shipping  Board  might  acquire. 
To  guard  agiainst  complications  with  the  belligerent  nations 
of  Europe  it  was  stipulated  that  the  Board  should  not  ac- 
quire vessels  registered  in  a  country  then  at  war.  It  was 
also  provided  that  government  operation  of  ships  should 
be  only  temporary,  the  corporation  or  corporations  organ- 
ized by  the  Board  being  required  to  cease  the  operation 
of  vessels  within  five  years  after  the  end  of  the  European 
War. 

The  law  did  not  come  soon  enough  to  give  «ny  relief 
during  the  winter  of  1916.  The  sinking  of  British  vessels 
by  German  submarines  continued,  and  the  precautions 
which  the  British  Admiralty  took  for  the  protection  of 
merchant  shipping  tended  to  render  the  shipping  service 
between  the  United  States  and  England  irregular.  One 
effect  of  inadequate  ocean  shipping  was  an  unprecedented 
railroad  congestion  in  the  United  States.  Thousands  of 
carloads  of  foodstuffs,  machinery,  and  military  supplies, 
intended  for  export,  accumulated  at  the  ea.'^tem  seaports 


598  THE  WORLD  WAR 

of  the  United  States^  choking  the  freight  terminals  and 
making  the  operation  of  the  railroads  extremely  difficult. 
The  failure  to  unload  export  traffic  from  freight  cars 
caused  a  car  shortage  the  country  over,  but  especially  in 
the  Central  and  Western  States.  Industry  and  commerce 
were  seriously  hindered  because  of  the  railroad  congestion, 
which  was  due  primarily  to  insufficient  ocean  transportation 
facilities. 

Effect  of  the  European  Wax  upon  American  Industry. 
It  was  but  natural  that  the  heightened  demand  for  Ameri- 
can products  in  Europe  should  have  a  stimulating  effect 
upon  nearly  all  branches  of  American  industry.  The  de- 
mand for  foodstuffs  caused  exceptional  activity  in  the  agri- 
cultural States.  In  1915  the  wheat  crop  was  more  than 
a  billion  bushels.  Additional  acreage  was  planted  for  the 
following  year,  but  an  unfavorable  season  resulted  in  the 
shortest  crop  harvested  in  six  years,  636;000,000  bushels. 
The  wheat  crop  for  1917  was  likewise  a  partial  failure,  be- 
ing only  a  few  thousand  bushels  greater  than  the  crop  of 
1916.  In  the  production  of  corn  the  farmers  were  more 
fortunate.  The  crop  of  1915  was  just  below  three  billion 
bushels,  that  of  1916  a  little  more  than  two  and  a  half 
billion  bushels,  and  the  crop  of  1917  broke  all  records, 
amounting  to  3,065,283,000  bushels. 

The  largest  cotton  crop  ever  gathered  in  the  South  came 
in  1914,  the  year  in  which  the  war  started.  With  the  sud- 
den decline  of  the  foreign  demand  for  cotton  the  planters 
were  fearful  that  they  would  be  ruined.  "Buy  a  bale" 
became  a  watchword  for  a  time,  everybody  being  urged  to 
come  to  the  rescue  of  the  cotton  growing  industry.  The 
price  of  middling  cotton  fell  from  an  average  of  7.68  cents 
a  pound  in  1914  to  6.74  cents  a  pound  in  1915,  a  much 
smaller  decline  than  many  had  expected.  There  was  a 
short  crop  in  1916,  and  a  greatly  increased  demand  from 


THE  WORLD  WAR  599 

American  textile  mills  and  from  munition  plants  both  in 
America  and  Europe  carried  the  price  to  9.18  cents  a  pound. 
The  cotton  planters  entered  upon  a  period  of  great  pros- 
perity. 

In  nearly  all  manufacturing  and  mining  industries  the 
war  caused  extraordinary  activity.  The  production  of 
coal,  which  in  1914  amounted  to  458,504,890  tons,  reached 
581,609,263  tons  in  ]917,  while  the  production  of  iron  ore 
reached  the  unprecedented  figure  of  77,870,553  tons  in 
1916.  Zinc  and  copper,  needed  in  large  quantities  for  the 
manufacture  of  munitions,  were  produced  in  larger  quan- 
tities than  ever  before.  New  high  records  of  production 
were  attained  in  the  iron  and  steel  mills  of  the  country, 
as  well  as  in  the  textile,  leather  -and  automobile  industries. 
A  most  interesting  feature  of  manufacturing  development 
due  to  the  war  was  the  rise  of  industries  to  supply  com- 
modities which  the  United  States  had  for  years  purchased 
almost  exclusively  from  Germany.  The  manufacture  of 
dyestuffs  and  dyes  was  the  most  important  of  these  new 
industries.  Other  articles  which  were  produced  in  large 
quantities  because  of  the  interruption  of  trade  with  Ger- 
many were  potash,  chemicals  of  various  kinds,  scientific 
instruments,  toys  and  o-ptical  goods. 

Prices  and  Wages.  The  rise  of  prices  since  the  begin- 
ning of  the  war  in  1914  has  been  the  most  significant  as 
well  as  the  most  disturbing  feature  of  the  economic  trans- 
formation which  the  great  conflict  produced.  The  years 
1913  and  1914  had  been  in  the  main  years  of  depression. 
The  market  had  been  sluggish,  prices  had  tended  to  recede, 
and  there  was  a  great  deal  of  unemploj^ment  throughout 
the  United  States.  The  war  demand  did  not  have  a  pro- 
nounced etfect  upon  prices  during  the  first  eight  months  of 
1915  because  the  forces  of  production  were  able  to  keep 
up  with  increased  needs  merely  by  taking  up  the  slack 


600  THE  WORLD  WAR 

which  two  years  of  depression  had  created.  But  with  the 
great  curtailmcD  t  of  production  in  Europe  and  a  constantly 
growing  need  for  American  godds  of  every  description,  de- 
mand outstripped  supply  and  prices  began  to  climb.  The 
average  of  wholesale  commodity  prices  was  24  per  cent 
higher  for  1916  than  for  1914.  "With  the  rise  in  the  cost 
cff  living,  laborers  demanded  higher  wages,  and  with  em- 
ployers beginning  to  compete  eagerly  against  one  another 
for  workmen,  it  was  but  natural  that  wages  should  rise. 
Manufacturing  plants  holding  contracts  for  war  supplies 
tried  to  draw  labor  from  the  farms  with  tempting  offers  of 
higher  pay.  One  of  the  interesting  industrial  changes 
caused  by  the  war  was  the  migration  of  large  numbers  of 
negro  workers  from  Southern  plantations  to  Northern  mills. 
Farmers,  in  order  to  hold  their  workers,  were  forced  to 
share  with  them  the  increasing  sums  derived  from  the  sale 
of  agricultural  products.  An  upward  spiral  movement 
of  prices  and  wages  began  which  was  not  to  end  until  both 
reached  dizzy  heights. 

America  Enters  the  War.  The  European  conflict  which 
began  in  1914  was  similar  in  many  respects  to  the  struggle 
which  had  taken  place  a  century  before  between  Napoleon 
and  England.  It  was  a  struggle  for  survival.  A  German 
victory  meant  the  virtual  annihilation  of  France,  the  dis- 
ruption of  the  great  British  Empire,  and  the  domination  of 
Europe  and  a  large  part  of  Asia  by  the  Prussian  military- 
autocracy.  With  the  stakes  of  war  what  they  were  it  was 
inevitable,  just  as  during  the  Napoleonic  Wars,  that  the 
rights  of  neutrals  should  receive  little  consideration.  Both 
Germany  and  England  refused  to  permit  any  recognized 
rights  of  neutral  nations  to  imperil  their  chances  of  vic- 
tory. Germany's  first  act  of  war  was  the  violation  of  the 
neutrality  of  Belgium.  From  the  beginning  of  the  conflict 
both  Germany  and  England  adopted  an  attitude  that  in- 
dicated little  respect  for  the  commercial  rights  of  neutral 


THE  WORLD  WAR  601 

nations.  Since  the  United  States  was  the  leading  neutral 
commercial  nation  it  was  only  3  question  of  time  until  this 
country  should  become  involved  in  controversies  with  -both 
groups  of  belligerents. 

England's  invasion  of  neutral  rights  of  the  United  States 
consisted  chiefly  in  the  interruption  of  commerce  with  Ger- 
many through  the  neutral  ports  of  Western  Europe.  At 
the  most  her  action  involved  only  a  violation  of  the  prop- 
erty rights  of  AmericTan  citizens  and  was  properly  con- 
sidered in  this  country  not  to  be  a  sufficient  cause  for  war. 
Germany  did  not  stop  with  a  mere  violation  of  property 
rights.  To  carry  out  the  design  of  reducing  England  to 
impotence  German  submarines  began  to  sink  without  warn- 
ing all  classes  of  English  ships,  including  passenger  vessels 
carrying  scores  of  non-combatant  men,  women  and  children, 
many  of  whom  were  citizens  of  neutral  nations.  It  was 
Germany's  persistence  in  this  brutal  practice,  after  having 
once  agreed  to  stop  it,  that  finally  caused  a  declaration  of 
war  on  the  part  of  the  United  States,  though  the  declara- 
tion came  only  after  President  Wilson  had  exhibited  a 
patience  which  was  felt  by  many  of  his  countrymen  to  be 
anything  but  a  virtue. 

A  War  of  Resources.  The  declaration  of  Congress  that 
a  state  of  war  existed  between  the  United  States  and  Ger- 
many was  signed  by  President  Wilson  on  April  6,  1917. 
The  nation  made  ready  to  take  part  in  the  great  conflict. 
The  man  power  of  populous  America  was  to  be  thrown  into 
the  scales  against  Germany,  but  what  was  more  important 
than  man  power  was  the  great  material  resources  which 
the  United  States  could  contribute  to  the  cause.  It  was 
a  war  in  which  men  counted  for  little  without  machines 
and  materials.  In  an  address  to  the  country  issued  on 
April  16,  1917,  President  Wilson  set  forth  in  convincing 
language  the  duty  of  the  nation : 


602  THE  WORLD  WAR 

"We  must  supply  abundant  food  for  ourselves  and 
for  our  armies  and  our  seamen  not  only,  but  also  for  a 
large  part  of  the  nations  with  whom  we  have  now  made 
common  cause,  in  whose  support  and  by  whose  sides  we 
shall  be  fighting. 

*'We  must  supply  ships  by  the  hundreds  out  of  our 
shipyards  to  carry  to  the  other  side  of  the  sea,  submarines 
or  no  submarines,  what  will  every  day  be  needed  there, 
and  abundant  materials  out  of  our  fields  and  our  mines 
and  our  factories  with  which  not  only  to  clothe  and 
equip  our  own  forces  on  land  and  sea  but  also  to  clothe 
and  support  our  people  for  whom  the  gallant  fellows 
under  arms  can  no  longer  work,  to  help  clothe  and  equip 
the  armies  with  which  we  are  cooperating  in  Europe, 
and  to  keep  the  looms  and  manufactories  there  in  raw 
material ;  coal  to  keep  the  fires  going  in  ships  at  sea  and 
in  the  furnaces  of  hundreds  of  factories  across  the  sea; 
steel  out  of  which  to  make  arms  and  ammunition  both 
here  and  there;  rails  for  worn-out  railways  back  of  the 
fighting  fronts;   locomotives   and   rolling  stock  to   take 
the  place  of  those   every  day  going  to  pieces;   mules, 
horses,  cattle  for  labor  and  for  military  service;  every- 
thing with  which  the  people  of  England  and  France  and 
Italy  and  Russia  have  usually  supplied  themselves  but 
can  not  now  afford  the  men,  the  materials,  or  the  machin- 
ery to  make." 

The  Government  War  Organization.  The  problem  of 
mobilizing  the  people  and  resources  of  America  for  the  war 
was  mainly  a  problem  of  organization.  The  Government 
was  not  organized,  at  the  beginning  of  the  war,  for  the  great 
task  which  confronted  it.  The  ten  executive  departments, 
with  the  exception  of  the  War  and  Navy  Departments,  were 
not  designed  to  cope  with  the  problems  of  the  great  war. 
Even  the  army  and  navy  organizations  had  to  be  modified 
to  meet  the  new  conditions.  The  oi^ganization  which  was 
to  direct  and  control  the  material  resources  and  the  indus- 
trial population  of  the  country,  with  the  exception  of  the 


THE  WORLD  WAR  603 

Council  of  National  Defense,  had  to  be  constructed  after  the 
war  began. 

The  Council  of  National  Defense  had  been  created  by 
law  on  August  29,  1916,  as  a  part  of  a  belated  ''prepared- 
ness" program.  The  Council  consisted  of  six  members  of 
the  President's  Cabinet,  the  Secretaries  of  War,  Navy, 
Interior,  Agriculture,  Commerce  and  Labor.  Its  duty 
was  to  o'utline  a  program  for  the  efficient  utilization  of  the 
economic  resources  of  the  country  in  case  of  war.  The  law 
ei'eating  the  Council  also  authorized  the  appointment  of 
an  Advisory  Commission  of  seven  members  whose  duty  it 
was  to  give  the  Council  expert  advice  on  the  problems  of 
economic"  organization.  The  Advisory  Commission,  which 
was  appointed  in  October,  1916,  did  much  of  the  prelimi- 
nary work  of  preparing  the  nation  for  war.  The  Com- 
mittees on  raw  materials,  supplies,  munitions  and  transpor- 
tation rendered  exceptionally  valuable  service  during  the 
early  stages  of  the  conflict. 

As  the  war  activities  of  1?he  Government  increased  and 
it  became  more  clear  what  the  country  would  have  to  do 
to  exert  its  full  strength,  an  executive  organization  was 
built  up  to  deal  with  the  problems  of  an  economic  nature. 
As  finally  developed  this  organization  consisted  chiefly  of 
the  following  boards  and  government  corporations: 

1.  Shipping   Board. 

a.  Emergency  Fleet  Corporation. 

2.  War  Trade  Board. 

3.  Food  Administration. 

a.  United  States  Grain  Corporation. 

b.  Sugar  Equalization  Board. 

4.  Fuel  Administration. 

5.  Railroad  Administration. 

6.  War  Industries  Board. 

7.  War  Finance  Corporation. 

8.  War  Labor  Board. 


604  THE  WORLD  WAR 

Only  one  of  these  agencies,  the  Shipping  Board,  was  in 
existence  when  the  war  began.  The  Emergency  Fleet 
Corporation,  through  which  the  Shipping  Board  carried 
out  its  program  of  ship  building  and  ship  operation,  was 
incorporated  on  April  16,  1917.  The  Fuel  and  the  Food 
Administrations  were  created  under  the  terms  of  the  Lever 
Food  and  Fuel  Control  Act  of  August  10,  1917,  though 
previous  to  the  enactment  of  this  law  a  volunteer  organi- 
zation under  the  direction  of  Herbert  Hoover  had  done 
much  to  encourage  the  production  and  conservation  of  food. 
The  Espionage  Act,  passed  June  15,  1917,  authorized  the 
President  to  control  the  export  trade  of  the  country.  To 
carry  out  his  functions  under  this  law  President  Wilson 
created  an  Exports  Council,  under  which  an  Exports 
Administrative  Board  was  organized.  When,  under  the 
provisions  of  the  Trading  With  the  Enemy  Act  of  October 
6,  1917,  the  President  was  authorized  to  control  the  import 
trade,  the  Exports  Administrative  Board  became  the  War 
Trade  Board,  controlling  both  the  export  and  the  import 
trade.  The  Railroad  Administration  came  into  existence 
on  December  26,  1917,  when  in  pursuance  of  authority 
granted  in  the  Army  Appropriation  Act  of  August  29,  1916, 
President  Wilson  assumed  control  of  all  the  leading  railroad 
systems  of  the  United  States.  The  War  Industries  Board, 
which  became  an  independent  board  in  May,  1918,  was  the 
final  successor  of  a  series  of  boards  and  committees  which 
had  been  organized  under  the  Council  of  National  Defense 
to  direct  the  industries  of  the  nation  so  that  the  require- 
ments of  the  military  and  civilian  agencies  could  be  met 
in  order  of  their  importance.  The  War  Finance  Corpora- 
tion was  created  by  an  act  of  Congress  passed  on  April  5, 
1918.  It  received  a  fund  of  $500,000,000  to  be  used  in 
financing  essential  industries.  Its  work  was  closely  related 
with  the  work  of  the  Capital  Issues  Committee  of  the  Fed- 
eral Reserve  Board,  which  was  first  organized  by  the  Board 


THE  WORLD  WAR  605 

on  its  own  initiative,  and  later  sanctioned  by  an  act  of  Con- 
gress. The  Committee  advised  the  banks  on  their  loan  pol- 
icies, it  being  the  purpose  to  give  the  more  essential  indus- 
tries priority  over  the  less  essential  industries  in  the  matter 
of  obtaining  credit  from  the  banks.  The  War  Labor  Board 
was  a  supreme  court  for  the  trial  of  controversies  between 
laborers  and  their  employers.  It  was  formed  at  the  sug- 
gestion of  representatives  of  the  American  Federation  of 
Labor  and  of  an  organization  representing  employers. 
Though  the  War  Labor  Board  had  no  statutory  authority 
for  its  existence  and  though  its  decisions  were  not  legally 
binding,  its  recommendations  and  findings  were  generally 
accepted  both  by  workers  and  employers  throughout  the 
period  of  the  war. 

What  the  War  Organization  Did.  The  gigantic  tasks 
performed  by  the  Government  during  the  war  should  put 
at  rest  any  fear  that  a  democracy  can  not  function  effec- 
tively in  times  of  emergency.  The  war  organization  built 
shipyards  and  ships;  it  unified  the  railroads  into  a  single 
great  system ;  it  brought  about  a  marked  increase  in  the  pro- 
duction of  food,  controlling  the  distribution  and  regulating 
the  prices  of  several  leading  articles  of  food ;  it  controlled 
the  distribution  and  price  of  fuel ;  it  directed  the  whole 
course  of  the  country's  foreign  trade;  it  established  rela- 
tions between  the  organized  industrial  forces  of  the  nation 
on  one  side  and  the  military  and  naval  a.uthorities  on  the 
other  that  made  it  possible  for  the  Government  to  obtain  an 
enormous  mass  of  materials  and  equipment  with  a  minimum 
of  disturbance  of  the  ordinary  industrial  life  of  the  people. 
When  the  armistice  with  Germany  was  signed  on  November 
11,  1918,  the  United  States  had  an  army  of  approximately 
2,000,000  men  in  France,  equipped  as  well  as  or  better 
than  any  European  army.  The  United  States  was  produc- 
ing food  supplies,  clothing,  military  equipment,  munitions, 
ships,  and  all  the  multifarious  supplies  which  war  calls  for 


606  THE  WORLD  WAR 

at  a  more  rapid  rate  than  any  of  the  European  countries 
which  had  been  at  war  for  four  years  and  had  the  advantage 
of  a  better  war  organization  to  start  with.  The  Govern- 
ment made  mistakes,  it  is  true,  many  of  which  were  costly, 
but  considering  the  enormous  work  which  it  accomplished 
in  such  a  short  time,  with  conditions  such  as  they  were 
when  the  war  started,  it  is  surprising  that  the  mistakes 
were  so  few  and  the  accomplishment  so  great.  The  nation 
can  justly  take  pride  in  its  record  of  achievement. 


Fifty  Shipways  at  Hog  island 

War  Production  and  Conservation.  During  previous 
great  wars  there  had  been  more  or  less  fortuitous  changes 
in  productive  agencies  which  served  to  offset  the  losses 
occasioned  by  the  waste  of  war.  For  example  the  produc- 
tive capacity  of  England  increased  during  the  Napoleonic 
Wars  because  of  the  increased  use  of  mechanical  devices 
in  manufacturing.  During  the  American  Civil  War  the 
production  of  wealth  in  the  Northern  States  became  greater 
because  of  the  increased  use  of  agricultural  machinery-. 
During  the  World  War  there  were  no  great  inventions  to 
revolutionize  the  methods  of  production  in  any  industry. 


THE  WORLD  WAR 


607 


The  losses  sustained  by  the  diversion  of  man  power  to 
war  activities  could  be  made  up  for  only  by  increasing  the 
efficiency  of  the  productive  agencies  already  known  and  by 
the  more  economical  consumption  of  what  was  produced. 
There  were  a  few  instances  of  the  increased  use  of  com- 
paratively new  mechanical  devices.  On  the  farms  the  gas- 
oline tractor  enabled  a  single  man  to  tend  a  greater  acreage 
of  land  than  he  had  been  able  to  cultivate  with  a  team  of 
horses.  In  transportation  the  motor  truck  came  to  the 
relief  of  congested  railroads.  Even  the  airplane  was  used 
to  some  extent  for  commercial  purposes,  though  it  was  of 
much  greater  importance  as  an  instrument   of  warfare. 


The  Quistconck,  Built  at  Hog  Island 

Additional  labor  for  the  more  essential  industries  was 
obtained  by  the  suspension  of  activity  in  less  essential  indus- 
tries. For  example,  building  operations  in  cities  were 
greatly  curtailed,  and  there  was  little  highway  and  railroad 
construction  undertaken.  There  was  a  large  increase  in 
the  employment  of  women,  and  unfortunately  a  laxity  in 
the  enforcement  of  child  labor  laws. 

The  conservation  program  was  carried  out  chiefly  in 
connection  with  the  use  of  fuel,  food  and  clothing.  Elec- 
tric advertising  was  discouraged,  and  the  operation  of  less 
essential  industries  was  restricted  by  diminishing  their 
supply  of  coal.  People  voluntarily  economized  on  clothing ; 
patches  and  "shininess"  becoming  badges  of  respectability 


608  THE  WORLD  WAR 

and  patriotism.  A  system  of  licensing  and  rationing  cut 
down  the  wasteful  consumption  of  foodstuffs.  A  great 
saving  came  from  the  voluntary  sacrifices  which  people 
made  in  response  to  the  ' '  save  food ' '  campaign  of  the  Food 
Administration.  Perhaps  the  most  important  legislative 
measures  for  the  conservation  of  food  were  the  laws  re- 
stricting and  finally  prohibiting  the  manufacture  and  sale 
of  intoxicating  liquors.  Before  the  liquor  legislation  of  the 
war  expired,  national  prohibition  became  permanent 
through  the  ratification  of  the  eighteenth  amendment  to 
the  Constitution. 

Financing  the  War.  The  Treasury  administration  of 
the  Government  during  the  war  with  Germany  contrasted 
strongly  with  the  Treasury  administration  of  previous  im- 
portant wars  of  the  United  States,  in  that  it  embodied 
from  the  beginning  a  program  of  rigorous  taxation.  The 
disbursements  of  the  Federal  Government  between  April 
6,  1917  and  October  31,  1919,  amounted  to  $35,413,111,  000. 
During  this  time  $11,280,264,000  was  raised  by  taxation, 
and  approximately  $24,000,000,000  by  loans.  Of  the  total 
disbursements  some  $9,000,000,000  represented  advances  to 
foreign  countries  with  which  the  United  States  was  asso- 
ciated in  the  war.  Of  the  actual  expenditures  which  the 
Government  made  for  its  own  use  nearly  40  per  cent  was 
raised  by  taxation.  It  was  highly  fortunate  that  before  the 
war  began  the  Constitution  had  been  amended  to  permit  the 
levying  of  Federal  income  taxes.  Taxes  on  individual  and 
corporate  incomes  and  taxes  on  profits  accounted  for  more 
than  one-half  the  revenues  collected  by  the  Treasury  during 
the  war,  while  customs  duties,  which  had  so  long  been  the 
chief  source  of  the  Government's  receipts,  contributed 
less  than  five  per  cent. 

Prices  During  the  War.  The  upward  spiral  movement 
of  prices  and  wages,  which  began  before  the  United  States 
entered  the  war,  gained  momentum  during  1917  and  1918. 


THE  WORLD  WAR  609 

By  November  1918,  the  level  of  wholesale  prices  was  106 
per  cent  higher  than  it  had  been  in  1914.  There  is  a  wide 
difference  of  opinion  among  economists  as  to  the  funda- 
mental cause  of  the  rapid  rise  of  prices.  Those  who  adhere 
to  the  ' '  quantity  theory  of  money ' '  regard  the  fluctuations 
of  the  volume  of  currency  and  credit  as  the  primary  cause 
of  price  changes,  while  those  who  do  not  accept  the  quantity 
theory  lay  emphasis  upon  the  relation  between  the  demand 
for  and  the  supply  of  goods,  regarding  the  fluctuations  of 
the  volume  of  currency  and  credit  as  a  manifestation  of 
changing  tendencies  in  the  movement  of  prices.  Whatever 
the  fundamental  cause  of  changing  prices  the  fact  remains 
that  there  was  a  spectacular  increase  of  prices  during  the 
war.  At  the  same  time  there  was  an  enormous  expansion 
of  currency  and  credit.  The  shortage  of  goods  in  the  face 
of  a  constantly  enlarging  demand  was  unquestionably  re- 
flected in  rising  prices.  When  the  Government  entered 
the  market  with  enormous  orders  for  food,  clothing  and 
equipment,  it  came  into  competition  with  private  business 
interests  which  were  demanding  the  same  things.  As 
prices  rose  banks  found  it  possible  to  give  larger  credits 
against  the  security  of  marketable  commodities.  The  Gov- 
ernment had  unlimited  purchasing  power.  It  did  not 
adopt  a  financial  program  which  tended  to  restrict  the 
giving  of  credit  to  private  business.  As  the  demands  of  the 
Government  grew,  competitive  bidding  for  labor  and  for 
goods  was  encouraged  instead  of  checked.  Each  price 
advance  made  possible  a  greater  inflation  of  credit,  and  the 
greater  the  inflation  of  credit  the  greater  the  possibility 
of  paying  higher  prices.  Inasmuch  as  the  demand  for 
goods  kept  steadily  increasing  in  relation  to  the  supply 
there  was  nothing  to  stop  the  inflation  of  prices. 

Problems  of  Reconstruction.  When  hostilities  came  to 
an  end  the  people  of  the  United  States  were  confronted  with 
a  host  of  perplexing  problems  of  "reconstruction."     How 


610  THE  WORLD  WAR 

should  the  millions  of  men  and  women  engaged  in  war 
activities  be  restored  to  the  pursuits  of  peace?  What 
disposition  should  be  made  of  the  stores  of  goods  accu- 
mulated by  the  Government  in  anticipation  of  a  longer 
war?  How  should  those  industries  transformed  in  charac- 
ter for  the  purpose  of  supplying  war  needs  be  returned 
to  their  former  status?  What  steps  should  be  taken  to 
give  the  railroads  back  to  their  owners?  What  should  be 
done  with  the  fleet  of  merchant  vessels  built,  owned  and 
operated  by  the  Shipping  Board  ?  These  were  some  of  the 
questions  which  demanded  almost  immediate  answers.  In 
addition  to  these  problems  of  the  disposal  of  men  and  mate- 
rials there  were  many  serious  problems  of  a  less  concrete 
nature.  Among  such  problems  were  those  connected  with 
the  inflation  of  prices,  the  adjustment  of  differences  between 
labor  and  capital  and  the  revision  of  the  tax  laws.  The 
war  had  diverted  attention  from  the  subject  of  government 
regulation  of  business,  but  the  problem  was  by  no  means 
permanently  solved.  What  industrial  adjustments  should 
be  made  because  of  the  fact  that  the  United  States  had  be- 
come a  creditor  nation?  What  part  should  the  United 
States  take  in  restoring  the  shattered  world  to  order  and 
sanity?  And  above  all,  could  anything  be  done  to  prevent 
the  occurrence  of  another  terrible  world  war? 

Some  of  these  questions  demanded  specific  legislation; 
others  could  be  left  to  the  play  of  economic  forces  without 
the  interference  of  the  Government.  The  restoration  of 
the  military  forces  to  civilian  life  was  accomplished  with 
surprising  ease.  The  soldiers  were  discharged  from  ser- 
vice and  returned  to  industrial  activities  from  which  war 
had  called  them,  many  going  back  to  their  former  occupa- 
tions. The  lack  of  friction  with  which  the  transformation 
took  place  spoke  well  for  the  mental  e.lasticity  of  the  men 
and  for  the  fundamental  stability  of  economic  conditions 
in  the  United  States. 


THE  WORLD  WAR  611 

The  Transportation  Act.  One  of  the  first  subjects  which 
Congress  took  up  was  the  railroad  question.  There  were 
many  suggestions  as  to  what  Congress  ought  to  do.  A 
small  minority  of  the  public  wanted  the  United  States  to 
adopt  the  policy  of  government  ownership  of  railroads. 
Another  small  group  suggested  that  no  attempt  be  made 
at  once  to  formulate  a  new  railroad  policy  and  that  govern- 
ment operation  be  continued  for  a  period  of  at  least  five 
years.  The  great  majority  of  the  people  favored  the  early 
resumption  of  private  operation  with  Federal  regulation, 
though  there  was  a  wide  divergence  of  views  as  to  what 
ought  to  be  the  scope  and  method  of  regulation.  Congress 
refused  to  entertain  seriously  any  plan  looking  to  the  owner- 
ship of  railroads  by  the  Government,  but  did  make  some 
radical  changes  in  the  policy  of  railroad  regulation.  These 
changes  were  embodied  in  the  Transportation  Act,  which 
was  approved  by  President  Wilson  on  February  28,  1920. 

In  framing  the  new  law  Congress  recognized  at  last 
that  the  railroads  should  not  be  compelled,  even  in  theory, 
to  compete  with  one  another  in  the  matter  of  making  rates. 
To  this  extent  the  former  railroad  policy  was  reversed. 
Railroad  pools  were  legalized,  the  Interstate  Commerce 
Commission  being  authorized  to  supervise  such  pools  as 
might  be  formed.  Moreover  the  Commission  received  the 
power  to  name  not  only  maximum  railroad  rates  but  also 
minimum  rates.  It  was  also  given  power  to  regulate  car 
service  and  to  prescribe  the  division  of  joint  rates.  The 
Commission  was  directed  to  work  out  a  plan  for  the  con- 
solidation of  the  railroads  of  the  country  into  a  limited 
number  of  competitive  systems,  though  the  combinations 
proposed  by  the  Commission  were  not  to  be  compulsory. 
The  Commission  was  also  impowered  to  regulate  railroad 
capitalization. 

The  most  notable  features  of  the  Transportation  Act  are 
the  provisions  with  respect  to  rates  and  to  railroad  labor. 


612  THE  WORLD  WAR 

The  Commission  is  directed  to  divide  the  country  into 
districts  and  then  to  establish  rates  sufficiently  high  to 
yield  a  net  operating  income  equal  to  a  fair  return  on  the 
value  of  the  property  devoted  to  transportation  in  each 
district.  The  law  stipulates  that  for  two  years  beginning 
March  1,  1920  the  Commission  shall  regard  as  a  fair  return 
a  sum  equal  to  5i/2  per  cent  of  the  value  of  the  railroad 
property  (to  which  one-half  of  one  per  cent  may  be  added 
in  the  discretion  of  the  Commission).  After  the  expiration 
of  the  two  year  period  the  Commission  may  decide  what 
rate  of  return  is  to  be  considered  "fair."  If  under  the 
rates  named  by  the  Commission  any  single  railroad  corpora- 
tion should  receive  an  income  in  excess  of  6  per  cent  of  the 
value  of  its  property,  it  is  provided  that  the  excess  amount 
shall  be  divided  equally  between  the  railroad  and  the  Com- 
mission. The  funds  received  by  the  Commission  under 
this  provision  of  the  law  are  to  constitute  a  railroad  con- 
tingent fund  to  be  loaned  to  the  carriers  or  to  be  used  in 
the  purchase  of  equipment  which  shall  be  leased  to  the  rail- 
roads. The  law  is  designed  to  insure  the  carriers  as  a 
whole?  a  fair  return  and  to  prevent  any  one  of  them  from  re- 
ceiving substantially  in  excess  of  a  fair  return.  Such  a 
system  of  price  regulation  represents  an  entirely  new 
departure  in  the  regulation  of  business  by  the  American 
Government. 

One  feature  of  the  railroad  problem  which  presented  a 
difficulty  of  obstinate  nature  was  the  fact  that  the  States 
had  long  exercised  their  power  to  regulate  rates  on  intra- 
state traffic.  Should  the  States  in  any  rate  district  decline 
to  permit  the  establishment  of  rates  equivalent  to  those 
named  by  the  Interstate  Commerce  Commission  it  might 
follow  that  the  interstate  business  of  a  carrier  would  have 
to  provide  a  disproportionate  share  of  the  "fair  return." 
To  meet  this  situation  the  Transportation  Act  provides  that 
whenever  the  Interstate  Commerce  Commission  finds  that 


THE  WORLD  WAR  613 

State  rates  are  such  as  to  cause  an  unjust  discrimination 
as  between  intrastate  and  interstate  commerce,  it  may  pre- 
scribe such  State  rates  as  will  remove  the  discrimination. 
Whether  Congress  has  the  power  to  undertake  such  sweep- 
ing regulation  of  intrastate  commerce  is  yet  to  be  decided 
by  the  courts. 

On  the  question  of  legislation  concerning  railroad  labor 
there  was  much  difference  of  opinion  in  Congress.  Some 
members  wanted  an  antistrike  and  compulsory  arbitration 
law.  The  Transportation  Act  does  not  forbid  strikes  and 
it  does  not  provide  for  compulsory  arbitration  in  railroad 
labor  disputes^ut  it  does  declare  it  to  be  the  duty  of  all 
carriers  and  (their  employees  to  exert  every  reasonable 
effort  to  avoid  the  interruption  of  transportation  because 
of  disputes  of  any  kind,  and  creates  the  machinery  through 
which  railroad  labor  disputes  may  be  settled  without  re- 
sort to  extreme  methods.  The  law  authorizes  the  creation 
of  Railroad  Boards  of  Labor  Ad.justment  composed  of 
representatives  of  employers  and  employees.  These  Boards 
may  endeavor  to  settle  disputes,  other  than  those  involv- 
ing rates  of  wages,  which  cannot  be  settled  by  direct  con- 
ference. The  Act  also  creates  a  salaried  Railroad  Labor 
Board  consisting  of  three  members  representing  labor, 
three  representing  employers  and  thfee  representing  the 
public,  all  to  be  appointed  by  the  President  with  the  advice 
and  consent  of  the  Senate.  This  Board  is  authorized  to 
adjudicate  disputes  concerning  rates  of  wages  and  to  hear 
on  appeal  disputes  not  settled  by  or  capable  of  being  set- 
tled by  the  Adjustment  Boards.  In  arriving  at  decisions 
with  respect  to  wages  the  Board  is  instructed  to  take  into 
consideration  the  cost  of  living,  the  scales  of  wages  in 
similar  kinds  of  work,  the  hazard  of  employment,  and 
other  recognized  economic  factors. 

The  Merchant  Marine  Act.  The  United  States  came  out 
of  the  war  with  a  merchant  marine  of  some  14,000,000 


614  THE  WORLD  WAR 

tons,  consisting  largely  of  newly  constructed  ships  and 
confiscated  enemy  vessels.  Most  of  this  shipping  is  the 
property  of  the  Government.  The  Shipping  Act,  passed  in 
1916,  provides  that  the  Government  shall  discontinue  the 
operation  of  ships  within  five  years  after  the  end  of  the 
European  War.  On  June  5,  1920,  a  law  was  enacted  pro- 
viding for  the  sale  or  lease  of  the  Government's  merchant 
vessels  on  reasonable  terms  to  private  shipping  agencies. 
The  law  also  contains  provisions  designed  to  encourage  the 
development  of  an  American  merchant  marine.  One  fea- 
ture of  the  act  which  has  caused  much  controversy  is  a 
clause  authorizing  and  directing  the  President  to  abrogate 
all  treaty  provisions  which  restrict  the  right  of  the  United 
States  to  impose  discriminating  tonnage  and  tariff  duties. 
Though  President  Wilson  signed  the  Merchant  Marine  Act 
he  declined  to  carry  out  this  provision  of  the  law,  justifying 
his  refusal  on  the  ground  that  the  law  was  an  infringement 
of  the  treaty  making  powers  of  the  executive  and  that  he 
was  not  bound  by  the  Constitution  to  take  the  action  which 
Congress  desired.  It  is  regretted  by  many  people  that 
Congress  passed  any  legislation  contemplating  the  restora- 
tion of  shipping  discrimination.  Such  discrimination  was 
a  part  of  the  mercantile  system  of  the  seventeenth  and 
eighteenth  centuries.  The  United  States,  by  laws  enacted 
between  1815  and  1830,  took  the  lead  in  bringing  shipping 
discrimination  to  an  end.  If  the  United  States  now  adopts 
such  a  policy  it  will  probably  be,  what  it  was  before,  a  fruit- 
ful source  of  international  contention  and  ill-will.  There 
are  other  and  better  means  of  aiding  the  merchant  marine. 
Prices.  It  was  generally  thought  when  hostilities  ended 
in  Europe  that  there  would  be  a  rapid  decline  in  the  level 
of  prices  in  the  United  States,  and  it  was  a  matter  of  some 
surprise  that  the  expected  development  in  the  price  situ- 
ation did  not  occur.  There  was  no  advance  in  prices  in 
December,  1918,  and  during  the  following  two  months  there 


THE  WORLD  WAR 


615 


was  a  slight  recession.  Then  prices  began  to  rise  again  and 
climbed  upward  almost  without  wavering  until  well  into  the 
year  1920.  In  ^lay,  1920,  the  level  of  wholesale  commodity 
prices  was  172  per  cent  higher  than  it  had  been  in  1913 
and  1914.  Prices  had  almost  tripled  in  the  short  space  of 
six  years. 

There  were  several  causes  for  the  continued  rise  of  living 
costs.  In  the  first  place  the  end  of  the  war  brought  no  de- 
crease in  the  demand  for  American  goods  abroad.     During 


260 
250 
240 
230 

210 
200 
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180 
170 
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130 
120 
110 
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Trend  of  \Yholesale  Prices,  1890-1920 
(Fureau  df  Labor  Statistics.     1913  =  100) 


the  four  years  of  warfare  a  large  part  of  the  fi,xed  capital  of 
Europe  had  been  destroyed  and  worn  out  without  being  re- 
placed, and  it  was  impossible  for  the  people  to  establish  pro- 
ductive activities  on  a  pre-war  basis  in  a  short  period  of 
time.  The  merchandise  exports  of  the  United  States  for  the 
fiscal  year  of  1919  were  greater  in  value  than  the  exports  of 
the  previous  year,  and  there  was  a  further  increase  during 
the  fiscal  year  of  1920. 

Another  element  in  the  price  situation  was  an  increased 


616  THE  WORLD  WAR 

consumption  of  goods  in  the  United  States.  The  measures 
of  economy  voluntarily  adopted  during  the  war  had  led 
many  persons  to  believe  that  the  American  people  had  laid 
aside  for  all  time  their  proverbially  extravagant  and 
wasteful  habits.  That  this  belief  had  little  foundation  soon 
became  evident.  It  is  probable  that  there  has  never  been 
in  the  history  of  the  United  States  such  an  orgy  of  ex- 
travagant spending  as  that  during  the  18  months  following 
the  World  War.  Hundreds  of  newly  rich  individuals  who 
had  made  large  profits  from  war  contracts  and  thousands 
of  highly  paid  workers  showed  the  way  in  expenditure  for 
luxuries"  and  amusement.  Many  who  had  practised  thrift 
during  the  war,  swept  away  by  the  general  feeling  of  re- 
action, sold  their  Liberty  bonds  and  thrift  stamps,  and  in- 
dulged in  a  revel  of  extravagant  living.  Stores  were 
crowded  with  purchasers  of  silks,  furs,  jewelry  and  luxu- 
rious clothing ;  baseball  parks,  theaters,  and  other  places  of 
amusement  were  crowded ;  more  automobiles  were  sold  than 
ever  before;  the  ''high  cost  of  living"  and  the  "cost  of 
high  living"  became  synonymous  terms. 

Another  factor  which  tended  to  cause  an  increase  of 
prices  was  the  activities  of  speculators,  who  by  hoarding 
large  quantities  of  food  products  and  raw  materials,  created 
an  artificial  shortage  of  many  commodities.  Bankers  gave 
their  assistance  to  the  practice  of  hoarding  by  lending  freely 
on  the  stored  supplies.  Secret  price  agreements  among 
supposedly  competing  producers  and  merchants  tended  to 
keep  prices  up.  The  recent  evidence  of  collusive  practices 
among  labor  organizations,  builders,  and  producers  of  lime, 
stone,  lumber,  and  cement,  brought  to  light  by  an  investi- 
gating committee  of  the  New  York  legislature,  indicates  how 
easy  it  was  to  maintain  prices  at  a  level  which  the  natural 
conditions  of  supply  and  demand  did  not  warrant. 

It  was  impossible  for  the  upward  movement  of  prices  to 
continue  indefinitely.     The  reaction  set  in  during  the  early 


THE  WORLD  WAR 


617 


months  of  1920.  The  foreign  market  for  American  goods 
began  to  decline,  partly  because  a  beginning  was  made  in  the 
restoration  of  European  industry  but  chiefly  because  the 
European  nations  weakened  their  credit  in  the  United 
States  to  such  an  extent  as  to  cause  a  decided  check  in  their 
buying  activity.  The  domestic  situation  also  changed. 
The  public  recovered  its  mental  equilibrium,  and  people 
looked  at  their  dollars  more  thoughtfully  before  parting 


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The  Movement  of  Prices  During  the  World  War 
(Bureau  of  Labor   Statistics.     Wholesale  Prices.     1913  =  100) 

wrth  them.  Extravagance  declined  and  demand  gradually 
decreased.  With  production  tending  to  increase  prices  be- 
gan to  drop.  The  effects  of  a  falling  price  level  soon  became 
manifest.  Retailers  who  had  loaded  their  shelves  with 
goods  purchased  at  high  prices  in  janticipation  of  a  contin- 
ued active  demand  found  themselves  in  possession  of  large 
stocks  which  would  not  move.  Manufacturers  with  abun- 
dant supplies  of  high  priced  raw  materials  or  with  large 


618  THE  WORLD  WAR 

stocks  of  finished  goods  on  hand  found  themselves  in  a 
precarious  position.  Speculators  were  caught  in  a  net  of 
their  own  contriving.  The  "bottom  dropped  out"  of  the 
silk  market,  the  automobile  trade  suffered  a  disastrous  re- 
verse, the  demand  for  textiles  went  steadily  downward,  the 
prices  of  hides  and  rubber  dropped  to  pre-war  levels,  the 
farm  prices  of  grain,  cotton  and  live-stock  came  tumbling 
down.  The  banking  interests  found  it  necessary  to  con- 
tract their  loans  and  refuse  credit  to  speculators.  This 
resulted  in  forced  sales  of  goods,  which  tended  to  depress 
prices  even  more  rapidly.  Retailers,  obstinately  resisting 
the  necessity  of  taking  a  loss  on  accumulated  stocks,  can- 
celed orders  already  placed  and  refused  to  buy  more  goods. 
This  action  was  reflected  in  a  general  slackening  of 
industry. 

The  process  of  readjustment  is  not  yet  (December,  1920) 
completed.  The  economic  situation  is  filled  with  unwelcome 
possibilities  of  general  industrial  and  financial  depression. 
There  is  a  large  volume  of  current  indebtedness  for  which 
there  is  little  prospect  of  payment  in  the  near  future. 
Whether  the  process  of  liquidation  can  be  drawn  out  long 
enough  to  permit  a  transition  to  a  lower  price  level  without 
a  general  business  collapse  remains  to  be  seen.  There  is  a 
flood  of  propaganda  in  favor  of  economic  fallacies  which 
have  been  urged  as  panaceas  in  former  times  of  business  re- 
action. The  greenback  and  the  free  silver  movements  are 
reappearing  in  the  guise  of  a  demand  for  credit  and  cur- 
rency inflation  through  the  expansion  of  Federal  Reserve 
loans.  Numbers  of  heavily  indebted  manufacturers,  hold- 
ing goods  for  which  there  is  no  market  at  prices  which  will 
cover  costs,  are  joining  wnth  cotton  planters  and  grain 
farmers  in  declaring  that  only  further  inflation  will  save 
the  country  from  ruin.  Inflation  may  serve  to  postpone  a 
crisis,  but  the  crisis  will  only  be  worse  when  it  finally  ar- 
rives. 


THE  WORLD  WAR  619 

Labor  Troubles.  No  domestic  problem  of  the  United 
States  promises  to  be  a  source  of  greater  trouble  in  the  near 
future  than  the  labor  problem.  During  the  war  the  labor 
organization  movement  gained  much  strength.  The  stra- 
tegic position  of  labor  is  always  stronger  during  a  period  of 
rising  prices.  Employers,  actively  competing  with  one  an- 
other in  the  labor  market,  are  disposed  to  grant  concessions 
to  their  working  forces  which  under  ordinary  conditions 
they  would  not  give.  The  agencies  of  the  Government 
freely  recognized  the  principle  of  collective  bargaining 
during  the  war  and  set  up  machinery  for  adjudicating  dis- 
putes between  employers  and  labor  organizations.  "When 
the  war  ended  labor  unions  felt  themselves  to  be  stronger 
than  ever  before,  and  they  were  not  unwilling  to  put  their 
new  found  power  to  the  test.  There  were  a  number  of  con- 
ditions which  tended  to  make  organized  labor  restive 
throughout  the  j-ear  1919.  Several  unions  had  fallen  under 
the  domination  of  radical  leaders  who  were  dissatisfied  with 
the  conservative  policies  of  the  American  Federation  of 
Labor.  The  new"  leaders  were  apostles  of  "class  conscious- 
ness," many  of  them  were  frankly  opposed  to  the  capital- 
istic organization  of  industry,  all  of  them  believed  with  sin- 
cerity that  labor  had  never  been  fairly  treated,  and  they 
were  more  than  willing  to  attempt  the  use  of  extreme 
measures  to  enforce  what  they  considered  to  be  the  rights 
of  the  working  classes.  For  the  most  part  wages  had  not 
risen  during  the  war  as  rapidly  as  the  cost  of  living  had 
risen,  and  there  was  much  dissatisfaction  in  the  rank  and 
file  of  labor,  of  which  the  radical  leaders  were  quick  to  take 
advantage.  As  the  cost  of  living  mounted  in  1919  there 
were  abundant  opportunities  to  call  strikes  with  much  show 
of  justification. 

During  the  early  months  of  1919  there  were  strikes 
among  textile  workers  in  Paterson  and  Passaic,  New  Jer- 
sey, Cohoes,  New  York,  and  Lawrence,  Massachusetts,  in 


620  THE  WORLD  WAR 

most  of  which  the  workmen  were  able  to  win  higher  wages 
and  shorter  working  days.  A  number  of  strikes  in  the 
clothing  trades  of  New  York  were  likewise  successful. 
Striking  street  railway  employees  in  Boston,  Chicago  and 
New  York  also  succeeded  in  obtaining  advances  in  wages. 
Throughout  the  year  there  was  a  succession  of  strikes  among 
the  longshoremen  and  other  harbor  workers  of  New  Yoj-k. 
In  midsummer  rumors  began  to  spread  of  approaching 
strikes  in  the  steel  and  coal  industries.  On  August  2,  there 
were  strikes  among  railway  shopmen  in  several  large  cities, 
called  by  local  union  leaders  in  defiance  of  the  instructions 
of  the  national  officers  of  the  shopmen's  organization.  These 
strikes  came  to  an  end  three  weeks  later  when  President 
Wilson  urged  that  demands  for  increased  wages  among  rail- 
road employees  be  halted  pending  the  results  of  the  Govern- 
ment's  efforts  to  bring  about  a  reduction  in  the  cost  of  liv- 
ing. To  add  variety  to  the  industrial  turmoil  the  Boston 
police  force  went  out  on  a  strike  on  September  9  because  the 
police  authorities  denied  the  right  of  the  policemen's 
organization  to  affiliate  with  the  American  Federation  of 
Labor,  and  an  actors'  organization  called  a  strike  which 
temporarily  closed  the  leading  theaters  of  New  York,  Chi- 
cago and  Boston. 

Throughout  the  spring  and  summer  of  1919  the  24  labor 
unions  in  the  steel  industry  carried  on  an  energetic  cam- 
paign for  organizing  the  employees  of  the  United  States 
Steel  Corporation.  The  central  committee  of  the  unions 
asked  for  a  conference  with  the  officers  of  the  corporation 
to  present  certain  demands,  which  included  a  recognition 
of  the  principle  of  collective  bargaining,  the  abolition  of  the 
twelve-hour  day  in  the  steel  industry  and  the  reinstatement 
of  a  number  of  workers  who  had  been  discharged  for  activ- 
ity in  behalf- of  the  unions.  President  Gary  of  the  Steel 
Corporation  refused  to  deal  with  the  unions'  representatives 
on  the  ground  that  they  were  not  employees  of  the  Steel 


THE  WORLD  WAR  621 

Corporation.  He  also  took  the  stand  that  a  conference 
would  be  tantamount  to  a  reco^ition  of  the  "closed  shop," 
and  as  a  firm  believer  in  the  "open  shop"  he  could  not  con- 
sent to  a  meeting  with  the  union  leaders.  President  "Wilson 
tried  to  secure  a  postponement  of  a  strike  at  least  until 
after  the  meeting  of  a  general  industrial  conference  which 
he  had  called  to  convene  in  October,  but  his  appeals  were 
without  effect.  The  strike  began  September  22  and  lasted 
about  three  months,  ending  in  the  complete  defeat  of  the 
unions.  The  Steel  Corporation,  whatever  its  shortcomings 
in  the  treatment  of  labor,  had  been  extremely  generous  in 
advancing  wages,  and  had  established  a  record  for  great 
liberality  during  the  war.  Its  hold  on  the  great  mass  of  its 
workers  was  stronger  than  that  of  the  labor  unions.  The 
steel  strike  served  to  call  public  attention  to  the  apparently 
irreconcilable  differences  between  organized  labor  and 
organized  capital  and  to  the  lack  of  regard  of  both  parties 
for  the  public  interest.  A  Senate  committee  which  investi- 
gated the  strike  condemned  the  union  officials  for  refusing 
to  postpone  the  strike  at  President  Wilson's  request  and 
also  found  that  President  Garj^  was  not  justified  in  his  re- 
fusal to  deal  with  the  union  leaders. 

The  expected  strike  of  the  bituminous  coal  miners  was 
called  for  November  1,  following  the  failure  of  the  miners 
and  their  employers  to  reach  an  agreement  with  regard  to 
wages  and  hours  of  labor.  President  Wilson  earnestly  re- 
quested that  this  strike  be  given  up  because  of  the  grave  in- 
jury which  it  might  inflict  upon  the  public.  AVhen  the 
officials  of  the  miners'  union  refused  to  withdraw  the  strike 
order  Attorney-General  Palmer  asked  for  and  obtained  an 
order  from  the  Federal  District  Court  at  Indianapolis 
enjoining  the  officers  of  the  union  from  sending  out  further 
strike  orders  and  forbidding  the  payment  of  strike  benefits 
from  the  union  treasury.  On  November  8  the  Court  issued 
another  injunction  directing  the  officials  of  the  union  to 


622  THE  WORLD  WAR 

recall  the  strike  order.  The  Court 's  action  was  based  upon 
the  terms  of  the  Lever  Fuel  and  Food  Control  Act  of  1917, 
which  prohibited  conspiracies  to  prevent  the  production  of 
food  and  fuel  during  the  war.  The  union  officials  obeyed 
the  order  of  the  court  to  call  off  the  strike,  but  the  men  re- 
fused to  go  back  to  work.  The  Secretary  of  Labor  sum- 
moned a  conference  of  miners  and  mine  operators  at  Wash- 
ington, and  after  considerable  negotiation  it  was  agreed 
that  the  miners  should  accept  an  immediate  increase  in 
wages  of  14  per  cent  and  leave  further  consideration  of 
the  dispute  to  a  commission  appointed  by  the  President.  In 
June  1920,  a  strike  of  the  anthracite  coal  miners  was  averted 
by  an  agreement  to  submit  the  differences  between  employ- 
ers and  workers  to  a  commission. 

The  Industrial  Conference.  Early  in  September,  1919, 
President  Wilson  announced  that  he  would  call  a  National 
Industrial  Conference,  consisting  of  three  groups,  represent- 
ing respectively  labor,  capital  and  the  public,  to  discuss 
methods  of  "bettering  the  whole  relationship  of  labor  and 
capital."  The  Conference  met  at  Washington  on  October 
6.  This  Conference  experienced  the  same  trouble  that  had 
done  so  much  to  render  ineffective  the  work  of  the  Industrial 
Relations  Commission.  The  groups  could  not  agree  with 
one  another  on  fundamentals.  The  group  representing  cap- 
ital refused  to  indorse  a  resolution,  accepted  by  the  other 
two  groups,  in  favor  of  the  principle  of  collective  bargain- 
ing and  in  favor  of  th^  right  of  laborers  to  deal  with  em- 
ployers through  agents  of  their  own  choosing,  and  the  Con- 
ference dissolved  without  accomplishing  anything.  Presi- 
dent Wilson  then  called  another  Conference  to  meet  Dec- 
ember 1.  This  gathering  was  not  divided  into  "groups" 
but  represented  industry  as  a  whole.  On  March  6,  1020, 
it  issued  its  final  report.  It  was  the  opinion  of  the  Con- 
ference that  many  labor  disturbances  could  be  prevented 
by  the  organization  in  single  industrial  establishments  of 


THE  WORLD  WAR  623 

"shop  committees"  or  "shop  councils"  in  which  both  em- 
ployers and  workmen  would  be  represented.  For  the  ad- 
justment of  disputes  not  capable  of  being  settled  by  shop 
councils  it  recommended  the  creation  by  law  of  a  system 
of  councils  for  industrial  conciliation,  consisting'  of  a 
National  Industrial  Board,  local  Regional  Conferences 
and  Boards  of  Inquiry.  The  Conference  gave  its  approval 
of  the  principle  of  collective  bargaining.  As  yet  no  legis- 
lation has  been  passed  to  carry  out  any  recommendations 
of  the  Conference. 

The  Labor  Problem  Becoming  More  Serious.  The 
downward  movement  of  prices  has  tended  to  make  the  labor 
problem  more  serious  than  before.  With  industry  slacken- 
ing employers  are  able  to  assume  the  offensive  again,  and 
they  are  inclined  to  push  ruthlessly  the  advantage  which 
they  possess.  Efforts  on  the  part  of  employers  to  reduce 
wages,  which  inevitably  come  with  declining  prices,  and  the 
campaign  for  the  "open  shop"  will  meet  with  the  stubborn 
resistance  of  all  labor  organizations.  The  outlook  for  indus- 
trial peace  is  not  bright. 

The  labor  controversies  of  the  past  few  years  have 
brought  out  more  clearly  than  ever  the  fact  that  after  all 
the  interest  of  the  public  is  the  paramount  interest  at  stake 
in  all  labor  troubles,  though  it  receives  little  consideration 
from  either  of  the  opposing  forces  in  the  industrial  world. 
It  is  becoming  apparent  that  we  can  not  depend  upon  cap- 
ital and  labor  to  work  out  a  satisfactory  method  of  establish- 
ing harmony.  Each  looks  only  to  its  own  selfish  interest 
and  neither  can  be  expected  voluntarily  to  adopt  any  other 
attitude.  There  are  a  few  exceptions.  In  a  few  instances 
employers  and  employees  have  finally  realized  that  it  is  to 
their  mutual  interest  to  settle  their  differences  by  amicable 
cooperation,  without  the  interruption  of  production.  Some 
employees  have  realized  the  wisdom  of  agreeing  to  certain 
standards  of  production  by  which  it  will  be  possible  to  es- 


624  THE  WORLD  WAR 

tablish  a  fair  estimate  of  their  earning  capacity,  and  some 
employers  have  acknowledged  the  necessity  of  giving  their 
workmen  the  right  to  cooperate  in  the  administration  of 
all  matters  affecting  the  interests  of  labor.  But  as  a  whole 
the  employing  class  is  inclined  to  be  "feudalistic"  in  spirit 
and  arbitrary  in  conduct,  while  labor  organizations  are  be- 
coming more  selfish  and  more  intolerant.  If  any  marked 
improvement  is  to  come  in  the  general  situation  it  will  prob- 
ably have  to  come  through  the  action  of  those  who  represent 
the  interest  of  the  public  at  large.  The  Kansas  legislature 
broke  new  ground  in  January,  1920,  when  it  passed  a  law 
prohibiting  strikes  in  industries  engaged  in  producing  food, 
fuel,  wearing  apparel  and  transportation,  creating  a  Court 
of  Industrial  Relations  to  investigate  labor  controversies  in 
such  industries  and  issue  orders  with  respect  to  wages,  hours 
of  work  and  working  conditions,  and  authorizing  the  State 
to  take  over  and  operate  any  industry  in  which  operations 
are  suspended  in  violation  of  the  law.  The  Transportation 
Act  is  a  new  departure  in  Federal  labor  legislation  as  well 
as  in  legislation  for  the  control  of  monopolistic  combinations 
of  capital.  It  may  be  found  advisable  to  extend  to  other 
great  monopolistic  industries  the  principle  of  confiscation 
of  all  profits  in  excess  of  a  fair  return.  The  adoption  of 
such  a  policy  has  been  talked  of  in  connection  with  the  coal 
industry,  in  which  flagrant  profiteering  has  existed  for 
many  years,  and  in  connection  with  the  meat  packing  in- 
dustry which  it  has  been  impossible  for  the  Government 
effectively  to  control  and  regulate  by  any  legislation  so  far 
devised.  Once  the  Government  undertakes  the  control  of 
the  process  of  distribution  of  the  national  income,  as  it  has 
already  done  in  the  railroad  business,  representatives  of 
capital  and  labor  may  find  it  easier  to  promote  industrial 
peace  by  voluntary  cooperation. 

The  Waste  of  War.     Transcending  in  importance  the 
economic  problems  of  purely  domestic  significance  is  the 


THE  WORLD  WAR  625 

problem  of  preventing  war.  War  is  the  most  wasteful  of  all 
human  activities.  The  material  welfare  of  the  people  of  a 
single  country  and  of  the  world  depends  primarily  upon  the 
production  of  wealth.  War  checks  the  processes  of  produc- 
tion, wipes  out  the  accumulation  of  the  past,  and  destroys 
the  productive  forces  upon  which  the  future  depends.  Ten 
million  men  were  killed  in  the  World  War,  and  many  times 
that  number  of  men,  women  and  children  have  died  or  are 
dying  from  starvation  and  disease  of  which  the  war  was  the 
cause.  The  war  debts  of  the  nations  taking  part  in  the  con- 
flict, amounting  to  some  two  hundred  billion  dollars,  repre- 
sent only  a  part  of  the  incalculable  waste  of  material  re- 
sources which  must  be  paid  for  with  human  suffering  and 
privation. 

When  the  Peace  Conference  assembled  at  Paris  in  Jan- 
uary, 1919,  hope  ran  high  that  out  of  its  deliberations 
would  come  an  international  agreement  of  some  kind  by 
which  it  would  be  possible  to  avert  disastrous  wars  in  the 
future.  When  the  treaty  was  signed  it  provided  for  the 
creation  of  the  League  of  Nations,  the  chief  purpose  of 
which  is  to  bring  about  the  settlement  of  international  dif- 
ferences without  recourse  to  armed  force.  In  the  United 
States  the  treaty  failed  of  ratification.  Some  people  think 
it  would  be  unwise  for  the  United  States  to  enter  into  any 
agreement  containing  an  obligation,  express  or  implied^  un- 
der which  the  country  would  be  expected  to  take  part  in  the 
settlement  of  disputes  between  foreign  nations.  Others  are 
anxious  to  see  this  country  do  its  share  in  the  promotion  of 
world  peace  but  object  to  certain  provisions  of  the  Covenant 
of  the  League  of  Nations;  while  still  others  think  the  United 
States  should  accept  the  Covenant  as  it  now  stands,  as  many 
great  and  small  nations  have  already  done.  Whatever  the 
merits  of  the  arguments  of  those  who  take  different  positions 
on  the  subject,  the  obstinate  refusal  of  the  political  leaders 
of  the  country  to  reach  a  compromise  of  some  kind  has 


626  THE  WORLD  WAR 

caused  the  United  States  thus  far  to  take  a  somewhat  ig- 
noble part  in  the  attempt  to  solve  the  world's  greatest  polit- 
ical and  economic  problem. 

The  disturbing  economic  conditions  in  the  United  States 
and  in  other  countries  are  the  aftermath  of  war.  Condi- 
tions now  are  similar  in  many  respects  to  the  conditions 
which  have  followed  other  wars,  only  worse,  because  the  re- 
cent war  was  more  destructive  of  life  and  property  than 
any  other  war  known  to  history.  They  are  perhaps  better 
than  the  conditions  which  would  follow  another  great  war 
because  it  is  reasonable  to  suppose  that  another  war  would 
set  a  new  record  for  destructiveness.  It  would  seem,  in  view 
of  the  enormous  loss  which  the  World  War  has  caused,  that 
unless  some  permanent,  tangible  gain  for  humanity  can  be 
obtained  as  a  result  of  the  conflict,  the  cost  of  the  war  has 
been  many  times  greater  than  the  value  of  any  temporary 
economic  or  political  advantage  which  this  or  that  nation 
has  derived  from  the  struggle.  An  effective  organization 
of  the  world  for  the  maintenance  of  peace  would  be  the 
war's  greatest  justification. 

Questions  and  Topics. 

1.  How  does  a  nation  pay  for  its  imports? 

2.  Is  a  favorable  ''balance  of  trade"  a  sign  of  greater 
prosperity  than  an  unfavorable  balance  ? 

3.  Have  the  losses  of  the  World  War  affected  adversely 
the  prosperity  of  nations  which  took  no  part  in  the  war  ? 

4.  When  the  United  States  entered  the  war  a  great  many 
people  adopted  the  slogan  "business  as  usual."  Was  a 
policy  of  business  as  usual  a  wise  policy  to  follow  ? 

5.  What  are  some  of  the  arguments  for  and  against 
government  ownership  of  railroads? 

6.  Should  the  United  States  adopt  the  policy  of  compul- 
sory arbitration  of  labor  disputes  ? 

7.  Should  the  United  States  abandon  its  traditional 
policy  of  non-participation  in  the  disputes  of  European 
nations  ? 


STATISTICAL  APPENDIX 

The  following  statistics  are  from  the  Statistical  Abstract 
of  the  United  States  for  1920.  They  should  be  of  value  as 
a  basis  for  exercises  in  making  graphs  and  charts  to  depict 
certain  phases  of  the  economic  progress  of  the  United 
States. 


Farms. 


Year. 


Number 
of  farms. 


I'ersons 
engaged 
In  agri- 
culture. 


Farm  animals. 


Cattle. 


Number. 


Number. 


Horses. 


Number. 


Sheep. 


Number. 


Swine. 


Number. 


1.449,073; 


14.971,586 
17,778,907 


4.335,669 
4,336,719 


19,311.374 
21,773,220 


26..'.01.29;{ 
30,354,213 


2.044,077 


25,616,019 


6.249.174 


22.471,275 


33.512.867 


2.659.985 


5.922,471 


4.008,907 


7.713,875 


4.564,641 


5.737.372 


0.361.502 


8.505.926 


10.381.765 


12.659,203 


20.079,725 
20.6.34.052 
21.433,099 
25.484.100 
26,235.200 
26.693.300 
26.989.700 
26.923.400 
27,220.200 
27.870.700 
29.216.900 
30.523.400 
33.234.500 
33.258.000 
33.307.363 
35. 891.870 
41.171.762 
42.547.307 
43,771.295 
4. "..5 10. 030 
48.033.833 
49.234.777 
50.331.142 
52.801.007 
52.805.230 
54.067.590 
52.378.283 
53,095.568 
50.868.845 
48.222  995 
46.450,135 
45.105.083 
43.984,340 
4  3.902.414 
02,333.870 
61.424.599 
01.764.433 
61.049.315 
61,241.907 
60  ,'J61  52" 
72.533.906 
71.267.000 
71,099.000 
61.803.000 
60,502.000 
57,959.000 
56.527.000 
56.592,000 
58.329.000 
61.920.000 
64,583.000 
67.4  22.000 
68,560,000 


5,401,263 
5.756,940 
6.332,793 
8.249.000 
8.702,000 
8. 990'.  900 
9.222.470 
9.33.3,800 
9.504.200 
9,735..300 
10.155.400 
10.329.700 
10.938.700 
11.202.000 
11.429.626 
10.521.554 
10.838.110 
11.169,683 
11,564,572 
12,077:657 
12.496.744 
13,172.936 
13,663.204 
14.214,000 
14.056,750 
1.5.498,140 
16.206.802 
16.081,139 
15,893.318 
15.124.057 
14.364.667 
13.960,911 
13.665.307 
13,538,000 
16.744.723 
16.531.224 
16.557.373 
16.736.059 
17.057.702 
18.718,57.<5 
19.746.5.«3 
19.992.000 
20,640.000 
19.S33.000 
20.277.000 
20.509.000 
20.567.000 
20.962.000 
21.195.000 
21.159.000 
21.210.000 
21.555.000 
21,482.000 


39.385,386 
38.991.912 
37.724.279 
40.853.000 
31,851.000 
31.679,000 
33.002,400 
33,938.200 
33.783.600 
35,935,300 
35,804,200 
35,740.500 
38.123,800 
40.766,000 
43,569.869 
45,016.224 
49.237.291 
50.626.626 
50,300.243 
48.322,331 
44.759,314 
43.544.755 
42.599.079 
44.336,000 
43.431.1.36 
44.938,365 
47.273.553 
45,04  8.017 
42.294,064 
3.V.29S.783 
36,818.643 
37.656.960 
39.114.453 
4  1 .8,^3.000 
59,756.718 
62.039.091 
63.964.876 
51.630.144 
45.170.423 
50.631.619 
53.240.282 
54.631.000 
56,0.^4.000 
52.448.000 
5:;. 633. 000 
52.362.000 
51.482.000 
49.719.000 
49.9.56.000 
4  8.625.000 
47.616.000 
48.603;0OO 
48,866.000 


24.693.534 
24.317.258 
23.316.476 
26.751.400 
29.457,500 
31.796.300 
32.632.050 
30,860.,900 
28.062.200 
25.726.800 
28.077.100 
32.262.500 
34.766.100 
34.034,100 
36.247.683 
44.122".200 
43.270.086 
44.200.893 
45.14  2.657 
46.092.043 
44.612,836 
44.346.525 
50.301.592 
51.603.000 
50,625.106 
52.398.019 
46.094.807 
4  5.206,498 
44,165.716 
4  2.84  2.759 
40,600.276 
39.759.993 
38.651.631 
37.079,000 
56,9.S2.142 
48.69.<«.890 
46,922.624 
47. 009. .367 
47.320.511 
52.102.847 
54.704.439 
."6,0S4'.000 
54.147.000 
5.S.l.tJ6.000 
65.620.000 
65.410.000 
61.178.000 
58.933.000 
64.618.000 
67.766.000 
67.503.000 
70.978.000 
74.5S4',00d 


Manufacturing  Industries. 

Year. 

No.  of 
estab- 
lish- 
ments. 

Salaried  officials, 
clerks,  etc. 

Wage  earners. 

Cost  of  mate- 
rials used. 

Value  of 

Num- 
ber. 

Salaries.        ^--^f  i        Wages. 

products. 

1800 

Dollars. 

DoUars. 

Dollars. 

Dollars. 

1810 

1820 

1830 

1840 

1850 

123,025 

957,059 

236,755,464 

555,123,822 

1,019,106,616 

1S55 

1 800 

140,433 

1,311,246 

378,878,966 

1.631,605,692 

1,885.861.676 

isni 

18G' 

18(>'H 

: ; :  : :  ■ 

1864 

1865 

1866 

1867 

1868 

1860 

252,148 

2,053,996 

775,584.343 

2,488,427,242 

4,232,325.442 

1870 

1871 

1872 

187H 

1874 

1875 

:::::: 

1876 

1877 

...  . 

1878 

1870 

253,852 

2,732,595 

947,953,795 

3,396,823,549 

5,369,579,191 

1880 

1881 

1882 

1883 

1884 

1885 

1886 

1887 

1888 

1889 
1800 

355.405 

461,001 

391,984,660 

4.251,535 

1,891,209,696 

5,162,013,878 

9,372,378,843 

1891 

1892 

1893 

1894 

1895 

1896 

1897 

1898 

1899 
1900 

207.514 

364,120 

380,771,321 

4.712.763 

2,00.8.361,119 

6,575,851,491 

11.406.926,701 

I'lOl 

190'' 

1903 

1904 
1905 

216.180 

519,556 

574,439,322 

5,468.383 

2,610.444.953 

8,500.207,810 

14,793.902.563 

1906 

1907 

1908 

1909 
1910 

268,49i 

790,267 

938,574,967 

6,615,046 

3.427,037.884 

12.142,790.878 

20.672.051, 87( 

1911 

191'' 

1913 

1914 
1915 

275,791 

964,217 

1.287,916.951 

7.036,337 

4,079,332,^.5 

14,368,088,831 

24,246.434.72' 

1916 

1917 

1918 

1919 

Production  of  principal  commodities. 


Wheat. 


Bushels. 


Corn. 


Bushels. 


84,823,272 
100,485,943 


173,104,924 


151,999,906 
212,441,400 
224,036,600 
260,146,900 
235,884,700 
230,722,400 
249,997.100 
281,254,700 
308,102,700 
292,136,000 
289,356,500 
364,194,146 
420,122,400 
448,756,630 
498,549,868 
383,280,090 
504,185,470 
421,086,160 
512,765,000 
3.57,112,000 
457,218,000 
456,329,000 
415,868,000 
490,560,000 
399,262,000 
011,780,000 
515,949,000 
396,131,725 
460,267,416 
467,102,947 
427,684,346 
530,149,168 
675,148,705 
547,303,846 
522,229,505 
748,460,218 
670,063,008 
637,821,835 
552,399,517 
692,979,489 
735,260,970 
634,087,000 
664,602,000 
737,189,000 
635,121,000 
021,338,000 
730,267,000 
763,380,000 
891,017,000 
,025,801,000 
636,318,000 
636,655,000 
921,438,000 
940.987,000 


377,531,875 
592,071,104 


Cotton. 


838,792,740 


867,946,295 
768,320,000 
906,527,000 
874,320,000 
,094,25.5,000 
991,898,000 
,092,719,000 
932,274,000 
850,148,500 
,321,069,000 
,283,827,.500 
,342,.558,000 
388,218,750 
547,902,000 
717,434,-543 
194,916,000 
617,025,000 
551,066,895 
795,528,000 
936,176,000 
665,441,000 
456,161,000 
987,790,000 
112,892,000 
489,970,000 
060,154,000 
628,464,000 
619,496,131 
212,770,052 
151,138,.580 
283,875,165 
902,967,933 
924,184,660 
078,144,000 
10.5,102,510 
522,519,891 
523,648,312 
244,176,925 
467,480,934 
707,993,.540 
927,416,091 
.592,320,000 
,668,651,000 
,772,.376,000 
,886,260,000 
,531,488,000 
,124,746,000 
,446,988,000 
,672,804,000 
,994,793,000 
,.566,927,000 
,065,2.33,000 
,.502,665,000 
,917.4.50.000 


Running 

bales, 
counting 
round  as 
half  bales. 


Number 

153,509 

286,195 

575,540 

1,026,393 

1,634,954 

2,454,442 

3,665,557 

3,849,469 

4,500,000 

1,600,000 

450,000 

300,000 

2,269,316 

2.097,254 

2,519,554 

2,366,467 

3,011,996 

4,352,317 

2,974,351 

3,930,508 

4,170,388 

3,832,991 

4,632,313 

4,474,069 

4,773,865 

5,074,155 

5,755,359 

6,605,750 

5,456,048 

6,949,7.56 

5,713,200 

5,682,000 

6,.575,691 

6,.505,087 

7,046,833 

6,938,290 

7,472,511 

8,652,.597 

9,035,379 

6,700,365 

7,493,000 

9,901,251 

7,161,094 

8,532,705 

10,897,857 

11,189,205 

9,393,242 

10,102,102 

9,582,520 

10,.588,2.50 

9,819,969 

13,451,33 

10,495,105 

12,983,201 

11,0.57,822 

13,086,005 

10,072,731 

11, .568,3.34 

15,.5,53,073 

13,488,. 539 

13,982,811 

15,905,840 

11,068,173 

11. .363,9 15 

11,248,242 

11,906,480 


Equivalent 

50iO-pound 

bales, 

gross 

weight. 


Number 

73,222 

177,824 

334,728 

732,218 

1,347,640 

2,136,083 

3,220,782 

3,841,416 

4,490,586 

1,596,653 

449,059 

299,372 

2,093,658 

1,948,077 

2,345,610 

2,198,141 

2,409,597 

4,024,527 

2,756,564 

3,650,932 

3,873,750 

3,528,276 

4,302,818 

4,118,390 

4,494,224 

4,745,078 

5,466,38 

6,356,998 

.5,136,44 

6,833,442 

5,521,963 

5,477,448 

6,369,341 

6,314,561 

6,884,667 

6,923,775 

7,472,511 

8,562,089 

8,940,867 

6,658,313 

7,433,056 

10,025,534 

7,146,772 

8,515,640 

10,985,040 

11,435,368 

9,345,391 

10,123,027 

9,.509,745 

10,630,945 

9,851,129 

13,4.38,012 

10,575,017 

13,273,809 

11,107,179 

13,241,799 

10,004,949 

11,608,616 

15,692,701 

13,703,421 

14,1.56,486 

16.134.930 

11,191.820 

11,449,930 

11,302.375 

12.040,.5.32 

1 1 .0.30.000 


Rice. 


Pounds. 

67,233,600 

78,804,600 

53,292,000 

81,351,600 

84,252,600 

102,775,800 

103,606,200 

106,279,200 

2,051,830 

2,086,280 

1,580,790 

4,740,580 

10,246,490 

25,154,720 

27,813,790 

43,651,910 

53,970,880 

54,888,880 

39,325,990 

52,275,780 

62,400,380 

67,813,400 

83,860,800 

86,628,200 

77,732,400 

81,513,800 

85,596,800 

111,868,990 

102,604,810 

99,985,000 

110,700,000 

109,561,600 

150,195,000 

155,669,500 

113,630,700 

124,733,200 

131,722,000 

136,800,000 

155,665,600 

237,546,900 

122,865,160 

109,820,800 

168,665,440 

96,886,400 

116,301,760 

136,990,720 

219,278,200 

253,139,200 

388,035,200 

319,292,960 

560.750,000 

.586,001,056 

377,971,917 

495,972,222 

520,500,00*) 

608,045,000 

606,638,889 

680,833,334 

637,055,5.")6 

695,944,444 

71.5,111,111 

6.56,916,667 

804,083,333 

,1.3.5,027,778 

964.972.222 

,072,388,889 

.140..-)27,778 


Sugar. 


Beet. 


Pounds. 


890,000 


1,120,000 
1,568,000 

224,000 

448,000 
2,688,000 

1.120,000 

1,198,400 

2,134,720 

1,344,000 

1,792,000 

4,603,200 

4,168,640 

4,934,720 

7,748,160 

11,997,440 

26.920,320 

44,688,000 

45,006,080 

65,452,800 

84,080,640 

90,491,520 

72,735,040 

163,458,075 

172,164,160 

369,211.733 

436,811,685 

481,209.087 

484,266,430 

62.5,841,128 

967,224,0(X) 

927.256,430 

851.768,000 

,024.938.000 

,020,344,000 

,199,000,000 

,38.5,112.000 

,466.802.0(K) 

,444.10S,000 

,748.440,000 

,641,314,000 

,.5.30,414,000 

.521.900.000 


Cane. 


Pounds. 


120,851,074 

247,577,000 

414,72.5,000 

230,982,000 

274,724,000 

539,830,500 

103,040,000 

85,060.000 

11,200,000 

20,680,000 

50,400,000 

51,520,000 

100,801,225 

87,043,000 

178,304,592 

[  156,.3.52,125 

134,8.32,493 

108.640.119 

142.240,691 

172,480,070 

199,360,570 

159,041,941 

250,880,753 

178,872,000 

f  285,302,899 

171,074,950 

;  318,746,258 

.302,944,230 

225,962,963 

302,754,486 

191,282,272 

375,904,197 

344,756,221 

301,284,395 

497,169,856 

370,579,307 

498,455,926 

610,82.5,618 

729,392,561 

543,633,726 

644.175,323 

708,251,878 

.568,789,795 

322,549.011 

623,774,123 

728,650,448 

745,805,875 

525,952,000 

784,000,000 

766,080,000 

.544,320,000 

788,480,000 

828,800,000 

750,400,000 

710,080,000 

721,748,160 

.325,147,200 

601,074,880 

493,2.39,040 

277,210.320 

621,799,360 

491,697,920 

568,796.480 


Production  of  principal   commodities — Continued. 


Wool, 


Pounds. 


Coal. 


Long  tons. 


Copper. 


Lontj 
tons. 


Iron  ore. 


Long  tons. 


Pig  Iron. 


Long  tons. 


Steel. 


Long  tons. 


Petroleum. 


Gallons. 


:5.j.802,114 


00,264,913 
75.000,000 
00,000,000 
lOG.OOO.OOO 
123,000;000 
142,000,000 
1. J  5,000,000 
100,000.000 
108,000.000 
100,102.387 
102.000.000 

ioo,ooo;ooo 

150,000,000 
158.000,000 
170,000,000 
181,000,000 
192,000,000 
200.000.000 
208,250,000 
155.681,751 
232.500.000 
240,000,000 
272.000.000 

2no.ooo;ooo 

300,000.000 
.".08,000.000 
302,000.000 
285,000:000 
269,000.000 
ini. 278.084 
276,000^000 
285,000,000 
294,000.000 
303,153,000 
298,057,384 
294,200,720 
272,474,708 
2.59,153,251 
206,720,684 
272,191,330 
288.636,021 
302,502,328 
316,341.032 
287,450,000 
291,783.032 
295,488,438 
298,915,130 
208,294,750 
311,138,-321 
328,110,749 
321,302,730 
318,547,900 
.304,043.400 
296,1 75..300 
290,102.000 
2S5,720'.000 
288,400.000 
281,802,000 
208.870.000 
307.4."O.0O0 


20 

3,0J?U 

285.77'J 

1,848,249 

6,200,233 

11,541,672 

13,044,680 

14,721,439 

15,612,353 

19,034^877 

21,076,003 

21,243,012 

25,890,050 

27,432,520 

20.341.030 

29,378;893 

29,490,054 

41,861,679 

45,940,535 

51.430,780 

46,909,571 

46.739,571 

47,571,429 

54,019,420 

51,728,214 

00,808,749 

63,822,830 

76,679,401 

92,456,419 

103.310.290 

107,281.742 

99,250,203 

101,500,381 

110,652,242 

132,731.837 

120,097,779 

140,800,931 

150,505,954 

100,115^242 

102.814,977 

152.447,701 

172.420,300 

171,410,390 

178,770.070 

190,407,381 

226,5.54,036 

240,789,310 

201,874,830 

200,277,178 

319,068^220 

314,121,784 

350.645,210 

309,783.284 

428,895^914 

371,288,123 

411,441,621 

447,853,900 

443,188,.505 

477,202.-303 

508,803.052 

458.504.800 

474.000.250 

526.873.371 

581.600.263 

005.540.343 


100 

650 

8,000 

7,200 

7.500 

9.000 

8,500 

8.000 

8,500 

8,900 

10,000 

11,000 

12,500 

12,600 

13.000 

12,500 

15.-500 

17,500 

18.000 

19,000 

21,000 

21,500 

23,000 

27,000 

32.000 

40;407 

51,574 

04,708 

74,052 

70,430 

81,017 

101,054 

101,239 

115,000 

126,830 

154,018 

147,033 

158.120 

109,917 

205,384 

220.571 

235,050 

2.53,870 

270,588 

208,782 

294,423 

311,027 

302,739 

402.037 

100.735 

387,045 

420.701 

487,025 

482,214 

489.836 

555.031 

546.645 

513.4.54 

010.647 

800.048 

842.018 

852.024 


3,031.891 


7,120.302 


14,518, 
10,030, 
14,.501, 
10,200, 
11,587, 
11,870. 
15.957, 
10,00.5, 
17,518, 
19,433. 
24,083: 
27..553: 
28,887, 
3.5..554, 
35,010, 
27,044, 
42.520, 
47,749, 
51,720. 
3.5,983. 
51,1.55. 
56.889. 
41,002, 
57,017. 
50.043. 
30.714. 
55.403. 
77.870. 
75.573, 
72.021. 


041 
043 
17S 
000 
,029 
070 
014 
440 
040 
71G 
173 
101 
470 
135 
308 
330 
133 
728 
010 
330 
437 
7-34 
447 
014 
008 
280 
100 
.553 
207 
202 


53,908 

20,000 

105,000 

280,903 

503,755 

700,150 

821,221 

653,164 

703,270 

846.075 

1,014,282 

831,770 

1,205,003 

1,305.023 

1,431,250 

1.711,287 

1,065,170 

1,706.793 

2,548,713 

2,560.903 

2.401.202 

2,023.733 

1,808,961 

2.006,594 

2.801.215 

2.741,853 

3,885,191 

4,144,254 

4.023,323 

4,59-5.510 

4.097,868 

4.044,526 

5,083.329 

6,417.148 

0.489:738 

7,003.042 

0.202.703 

8,279.870 

9,157;000 

7,124.-502 

0.057,888 

9,440,308 

8,023,127 

9.052.080 

11,773,934 

13,620,703 

13,789,242 

1  5,878.354 

17,821.307 

18,009.252 

16.497,0 

22,002.380 

25,307.101 

25,781.361 

15,030.018 

25,70-5';471 

27.303.507 

23,640..547 

20,720.037 

.30.000.152 

23.332.244 

29.910.213 

30.434.707 

38.621.210 

.30.0-54.644 

31.015.364 


19.043 

20,780 

31.250 

68,750 

73.214 

142.954 

198.796 

215.727 

389,799 

533.191 

509,618 

731.977 

935.273 

1,247.335 

1,588.314 

1.736.692 

1,673,535 

1,550.879 

1.711.920 

2,502.503 

3.339,071 

2,890,440 

3.385.732 

4.277;071 

3,904.240 

4,927.581 

4,019.005 

4.412.032 

6.114,834 

5.281.080 

7.150.957 

8,932,857 

10.039,857 

10,188.320 

13.473.595 

14,947,250 

14.534,978 

18:859.887 

20.023.947 

23.398.130 

23.302,-594 

14.023.247 

23.955.021 

26.094,919 

23,676.106 

31.251.303 

31.300.874 

23,51 .3^030 

32,151.036 

42.773.680 

45.060.007 

44,402.432 


21 

88 

128 

109 

88 

104 

151 

140 

158 

177 

220 

218 

264 

415 

458 

510 

383 

560 

646 

830 

1,104 

1,161 

1.281 

984 

1.017 

918 

1,178 

1.187 

1.150 

1,476 

1.924 

2.280 

2  121 

2.034 

2.072 

2,221 

2.500 

2.539, 

2,325 

2.806 

2,672 

2.014 

3.728 

4.210 

4.917 

5.058 

5.312 

6,070 

7.408 

7.003 

8,801 

9.258 

9.863 

10.434 

11.162 

11.806 

1 2.032 

14.083 

14.048 


000,000 
771.578 
380.980 
.674.978 
876,578 
.903.400 
.103.400 
586.600 
.136,914 
030.000 
.951:290 
,619.828 
.314,148 
.539.012 
,931.690 
.825.588 
.572,098 
,715.246 
.668,456 
.394,132 
,017.166 
,771.996 
,454^860 
,884,586 
174.396 
008.970 
723.322 
900.286 
,705.050 
,807,546 
,590,024 
,201,510 
405.594 
,104.772 
460.672 
.475.592 
335.162 
971.672 
207.786 
075.700 
002.218 
846.148 
,210.472 
,370.154 
400.320 
.138,360 
.745,312 
004.070 
148:010 
,176.708 
404,416 
.874.422 
271.848 
.741.660 
,026.470 
372..368 
220.6.86 
2.55.242 
064.072 


Exported  domestic 

mercbandise, 

classified  by  great  g 

roups. 

Crude    materials    for 

Foodstuffs    it 

crude 

Foodstuffs    partly    or 

use  ia  manufactur- 

condition, and  food 

wbolly       manufac- 

Year. 

ing. 

animals. 

tured. 

Per 

Per 

Per 

Value. 

cent  of 
total. 

Value. 

cent  of 
total. 

Value. 

cent  of 
total. 

Dollars. 

DoUam. 

Dollars. 

1800. . .  . 

1810 

1820 

31,246.3.82 

60.46 

2.474,822 

4.70 

10.085.366 

19.51 

1830 

36.482.266 

62.34 

2.724,181 

4.65 

9.556.902 

16.32 

1840 

75.488.421 

67.61 

4,564.532 

4.09 

15.036.108 

14.27 

1850 

83,984.707 

62.26 

7,535,764 

5.50 

20.017.162 

14.84 

1855 

108,476,851 

56.28 

10.910,803 

5.67 

33,009.127 

17.12 

1860 

216,009,648 

68.31 

12,166,447 

3.85 

38.624.949 

12.21 

1861 

57.014.269 

27.82 

48,795,865 

23.81 

.53.736.172 

26.23 

1862 

17,814,659 

9.92 

55.893,100 

31.11 

70.240.524 

39.10 

1863 

27.893.453 

15.00 

45,166.008 

24  "'8 

66.047.610 

35.51 

1864 

28,282,245 

19.70 

24,519,105 

17.09 

54.909.077 

38.26 

1865 

33.852,720 

24.71 

13,974.576 

10.20 

47,981.472 

35.04 

1866 

227,625.800 

67.42 

16.819.200 

4.98 

40.684,464 

12.05 

186T 

166,120,000 

59.38 

20.609.360 

7.37 

34,058.150 

12.17 

1868 

132,450.676 

40.17 

34.578..301 

12.83 

42.190.718 

15.66 

1869 

144.891,886 

52.66 

25.428,831 

9.24 

43,679.064 

15.87 

1870 

213,439.991 

56.64 

41.852.630 

11.12 

50.919,666 

13.53 

1871 

220,995,5.59 

51.59 

48.601.080 

11. .35 

66.862.580 

1.5.61 

1872 

194,458,406 

4.5.39 

.59.356..592 

13.85 

84.357.982 

19.68 

1873 

231,904,077 

45.92 

69,853.173 

13.83 

100.857.593 

19.97 

1874 

228,149,732 

40.06 

119,143.282 

20.93 

114,038,605 

20.03 

1875 

206.271.795 

41.31 

79,077.670 

1.5.84 

110.292.780 

22.09 

1876 

202,247,842 

38.49 

94,181.630 

17.92 

121.615..589 

23.14 

1877 

200.821.765 

.34.06 

90.636,898 

15.37 

150.101,362 

25.46 

1878 

213,128.093 

31.31 

154.809.695 

22.74 

170.277,023 

25.01 

1879 

198.687,747 

28.45 

188.526,950 

27.00 

174.230.816 

24.95 

1880 

238.787.934 

28.98 

266.108.950 

32.30 

193.352,723 

23.47 

1881 

278,918.722 

31. .55 

241.641.847 

27.34 

226.386.821 

25.62 

1882 

233,294.072 

31.82 

155.008.497 

21.14 

178.002,738 

24.28 

1883 

288,841.684 

35.02 

163.196.443 

20.29 

186,392.822 

23.18 

1884 

239,510,224 

33.04 

130,395.872 

17.99 

194.703,245 

26.86 

1885 

248,611,181 

34.22 

123.326.867 

16.97 

201.800.801 

27.77 

1886 

2.54,409.407 

38.21 

100.799.692 

15.13 

162.689.021 

24.43 

1887 

2.50.236,436 

35.60 

125.453.686 

17.85 

175.784.781 

25.00 

1888 

271.275.629 

.39.67 

86.368.408 

1 2.63 

169,872,314 

24.84 

1889 

286,235.227 

39.19 

98.847,455 

13.54 

174..504.227 

23.00 

1800 

304,566,922 

36.03 

132.073.183 

15.62 

224.756.580 

26.59 

1891 

346,848,321 

39.77 

106.155,721 

12.17 

226.44  8..303 

25.06 

1892 

315.096,548 

31.02 

262.4.55.846 

25.84 

250.438,545 

24.66 

1893 

247,289,240 

29.75 

153.277.8.59 

18.43 

247,075.061 

29.73 

1894 

276,068.989 

31.76 

133,196,928 

15.30 

249.846.142 

28.77 

1895 

263,982.189 

33.27 

90.144,413 

12.50 

210.090.209 

27.61 

1896 

251,817.571 

29.17 

128.550.660 

14.00 

219,413.574 

25.41 

1897 

296.834,858 

28.76 

181,420.814 

17.58 

235,051.9.30 

22.79 

1S98 

286.311.334 

23.66 

305.108.915 

25.21 

284,870.827 

23.54 

1899 

277,723.374 

23.07 

232,903,066 

19.35 

304.606.334 

25.31 

1900 

325.244.296 

23.73 

225,906.246 

16.48 

310.606.334 

23.32 

1901 

397.417.247 

27.21 

245.8,36.198 

16.83 

337,152.992 

23.09 

1902 

373.307.140 

27.54 

184.786.389 

13.63 

328.831.350 

24.26 

1903 

408.442.137 

29.34 

185.308.064 

13.31 

323.244,697 

23.22 

1904 

461.424.464 

32.15 

135.747.224 

9.46 

308.836.077 

21.52 

1 905 

472.114.493 

31.65 

118.1,85.008 

7.92 

283.065.008 

18.97 

1906 

500.536.700 

29.14 

177.216.467 

10.32 

347.385.463 

20.22 

1 907 

5!»3.145.135 

32.00 

167.348.227 

0.03 

345.706.600 

1,S.65 

1908 

5.56.681.462 

30.34 

180.051.824 

10.. 30 

331.061.663 

1.8.10 

1909 

520.907.436 

31.80 

135.603.400 

8.28 

302.555.341 

18.47 

1910 

565.034,957 

33.10 

100.828.320 

6.42 

250  250  654 

15.16 

1911 

713.018.206 

35.4 1 

103.401.55:'. 

5.13 

282.01 6. SS3 

14.01 

1912 

723.008.S39 

33.31 

99.899.270 

4.60 

31  S. 838, 40.". 

14.60 

1913 

731.758.513 

30.13 

181.007.266 

7.40 

321.'^04.37:< 

1 3.23 

1914 

792.716.100 

34.03 

137.405.121 

5.!  10 

203.21  S  33f! 

12.59 

1915 

510.4.55.540 

18.80 

506.003.170 

18.66 

454.575.401 

16.74 

1916 

535.952,043 

1 2.55 

380.638.102 

8.01 

500.050.151 

14.02 

1917 

731 .090.3.S0 

11.76 

531.866.000 

8.54 

737.705.3:'.J 

11.85 

1918 

807,324.082 

1  5.37 

374.078.216 

6.4" 

1.153.702.460 

10.76 

1919 

1.610,134,072 

20.78 

678.363.413 

8.75 

1.962.615.460 

25.32 

Exported  domest 

c  merchandise,   classified  by  great  groups — Contd. 

Manufactures     for 
further     use     in 
manufacturing. 

Manufactures  ready 
for  consumption. 

Miscellaneous. 

Year. 

Total  value. 

Per 

Per 

Per 

Value. 

cent 

of 

total. 

Value. 

cent 

of 
total. 

Value. 

cent 

of 
total. 

Dollars. 

Dollars. 

Dollars. 

Dollars. 

.  .1800 

.  .1810 

4,867,379 

0.42 

""*2.025,i65 

s'.GG 

84.520 

o.ie 

**5i,683,646 

..1820 

4.117,606 

7.04 

5,461,589 

9.34 

182,244 

.31 

58,524,878 

..1830 

4,841,101 

4.34 

10,584,079 

9.47 

240,320 

.22 

111,600,501 

..1840 

6,060,900 

4.49 

17,162,206 

12.72 

130,404 

!io 

134,000,233 

..1850 

11,304,094 

5.86 

28,832,786 

14.96 

208.474 

.11 

102,751,135 

..1855 

12.641,625 

3.99 

35,811,383 

11.33 

088,371 

.31 

310,242,423 

..I860 

8.400,921 

4.10 

35,503,955 

17.33 

1,448.434 

.71 

204,800,010 

..1801 

8,126,464 

4..52 

26,918,451 

14.99 

041,820 

.36 

170,044,024 

..1802 

11,393,244 

6.12 

33,447,115 

17.08 

2.050,482 

1.11 

186,003,012 

..1803 

9.861,090 

6.88 

25,344,570 

17.66 

587,940 

.41 

143,504,027 

..1804 

10,650,288 

7.79 

30,120,810 

22.00 

300.370 

.20 

136,040,248 

..1805 

12,357,000 

3.66 

39,231,280 

11.62 

800,858 

.27 

337,518,102 

..1806 

15,065,010 

5.38 

43.505,080 

15.55 

420,209 

.15 

270,786,800 

..1867 

17,017,616 

6.32 

42.935.166 

15.04 

217,423 

.08 

200,880.000 

..1808 

13,887,562 

5.05 

47,139,144 

17.13 

140,210 

.05 

275,106,607 

..1809 

13,711,708 

3.66 

56,329,137 

14.00 

363,341 

.00 

376,010,473 

..1870 

13,858,056 

3.23 

75,551,340 

17.03 

2,530,284 

..50 

428,308.908 

..1871 

21.087,265 

4.92 

65,306,501 

15.24 

3,920.385 

.02 

428,487,131 

..1872 

24,976,655 

4.95 

76,059.102 

15.06 

1,382,839 

.27 

505,033,430 

..1873 

26,026,258 

4.57 

81,124,581 

14.24 

050,003 

.17 

500,433,421 

..1874 

27,458,054 

5.50 

74.503,493 

14.02 

1,680,200 

.34 

400,284,100 

..1875 

31,459,259 

5.98 

74,450,509 

14.16 

1,627,418 

.31 

525,582,247 

..1876 

31,513,556 

5.34 

112,673,046 

10.11 

3,023,507 

.00 

580,070.224 

..1877 

28,685,480 

4.22 

110,440,970 

16.23 

3,868,007 

.40 

080,700,268 

..1878 

30,169,002 

4.32 

103.254,490 

14.78 

3,471,767 

.50 

608,340,700 

..1879 

29.044, lo9 

3.52 

92,774,130 

11.26 

3,878,448 

.47 

823,046,353 

..1880 

32,820,713 

3.71 

102,458,449 

11.59 

1,600,395 

.10 

883,025,047 

..1881 

37,164,800 

5.07 

124,835.385 

17.02 

4,034,240 

.07 

733,230,732 

..1882 

37,996,198 

4.72 

122,448,549 

15.23 

5,347,030 

.00 

804,223,032 

..1883 

37,800,437 

5.21 

118.172,882 

16.30 

4,382,192 

.00 

724,004,852 

..1884 

39,437,313 

5.42 

110,818,865 

15.25 

2,087,919 

.37 

726,682,040 

..1885 

34,037,715 

5.11 

111,027,312 

10.70 

2,401,382 

.86 

665,064,520 

..1886 

36,732,490 

5.22 

112,417,830 

15.90 

2,307,001 

.84 

703,022,023 

..1887 

40,176,023 

5.88 

113,802,089 

10.05 

2,277,041 

.33 

683,802,104 

..1888 

42,712,932 

5.85 

123,183,883 

16.87 

4,708,885 

.65 

730,282,000 

..1889 

46,454,992 

5.50 

132,527,050 

15.08 

4,015,101 

.58 

845,203,828 

..1890 

47,961,372 

5.49 

140,349,741 

10.00 

4,500,825 

.52 

872,270,283 

..1801 

50,284,241 

4.95 

132,792,441 

13.07 

4,004,300 

.40 

1,015,732.011 

..1802 

49,070,703 

5.94 

129,038,284 

15.03 

4,370,038 

.52 

831,030,785 

..1893 

67,145,189 

7.72 

135,6.50,274 

15.01 

7,288,415 

.84 

800,204,037 

..1804 

62,253,782 

7.85 

143,609,893 

18.10 

5,812.023 

.07 

703,302,500 

..1895 

76,219,728 

8.85 

181,789,157 

21.04 

5,400,788 

.03 

863,200,487 

..1896 

98,284,243 

9.52 

212,059,122 

20.03 

7,450,036 

.72 

1,032,007,003 

..1807 

101,990,563 

8.43 

222,537,358 

18.38 

0,463,910 

.78 

1,210,201,013 

..1808 

117,730,260 

9.78 

262,056,583 

21.81 

8,103,203 

.08 

1.203,031,222 

..1800 

153,275,660 

11.18 

331,746,490 

24.20 

14,804,530 

1.00 

1,370,703,571 

. . 1000 

148,350,529 

10.16 

317,745,673 

21.76 

13,000,107 

.05 

1,400,462,800 

..1901 

132,206,324 

9.75 

321,946,630 

23.75 

14,404,028 

1.07 

1,355,481,801 

..1002 

140,666.864 

10.10 

327,468,020 

23.52 

7,100,911 

.51 

1,302,231,302 

. . 1003 

174,876,659 

12.19 

348,734,801 

24.30 

5,550,792 

.38 

1,435,170,017 

..1004 

209,926.174 

14.07 

402,040,708 

20.06 

6,403,980 

.43 

1,491,744.041 

. .1005 

226,210,513 

13.17 

450,812,055 

20.70 

6,791, .584 

.30 

1,717,953;882 

..1006 

259,442,028 

14.00 

480,681,423 

25.03 

7,304,012 

.30 

1,853,718,034 

. .1007 

261,105,883 

14.23 

480,460,058 

20.08 

6.515.567 

.35 

1,834,780,357 

..1008 

231,144,267 

14.11 

440,271,747 

20.87 

7,783.3f)3 

.47 

1,63S,355,.503 

.,1000 

267,765,016 

15.66 

499,215,320 

20.10 

8,070,822 

.47 

1,710,083,008 

.  .1010 

309,151,980 

15.35 

598,367,852 

20.72 

7.I)02..542 

.38 

2.013.540,025 

..1011 

348,140,524 

16.04 

672,268.103 

.'iO.OS 

8.1.55.530 

.38 

2,170.310,828 

..1012 

408,806,949 

16.83 

776.207.300 

31.07 

8..Tm.807 

.35 

2.428,500,358 

.  .1013 

374,224.210 

16.06 

724,008.000 

31.11 

7.122.240 

.31 

2.320,084,025 

..1014 

355,862,320 

13.10 

807,465.511 

20.73 

80.820.502 

2.07 

2.710.178.405 

. .1015 

657,023,.305 

15.40 

1.008.208,240 

40.77 

100.300.720 

2.35 

4,272.177.570 

. .1016 

1,191,262,523 

10.13 

2.042.577.415 

47.25 

01,672.430 

1.47 

0.227.164.050 

. .1017 

1,201,4.39,423 

20..58 

2,185.420,221 

37.43 

25.787.655 

.44 

5.838.652.057 

. .1018 

022,401,664 

11.90 

2,563,3.50,160 

33.08 

12,050.778 

.17 

7,740.815,550 

..1019 

imported  merchandise,  classltied  by  great  groups. 

3rude    material.s    for 

Foodstuffs    in 

crude 

Foodstuffs    pa 

rtly   or 

uso  ia  manu 

factur- 

condition,  and  food 

wholly       manufac- 

Year.. 

ins. 

animals 

tured. 

Per 

Per 

Per 

Value. 

cent  of 
total. 

Value. 

cent  of 
total. 

Value. 

cent  of 
total. 

Dollars. 

Dollars. 

Dollars. 

1800 

"i. 983, 706 

1810. . . . 

1820 

3.64 

6,081,641 

11.15 

10,820.814 

10.85 

1830 

4.214.825 

6.72 

7.382.274 

11.77 

9.653,971 

15.39 

1840 

11,510.245 

11.71 

15,273,321 

15.54 

15,188,845 

15.46 

1850 

11.711,266 

6.75 

18.011,659 

10.38 

21,465.776 

12.37 

1855 

26.151,458 

10.14 

32,935,329 

12.78 

34.137,837 

13.24 

1860 

39.691,797 

11.22 

45,743.826 

12.94 

59.837.674 

16.02 

1861 

29,259,172 

10.11 

40.177.496 

13.89 

53.742.740 

18.58 

1862 

31,928.211 

16.86 

32.495.120 

17.17 

34,566,127 

18.25 

1863 

46,958,837 

19.30 

30.454.691 

12.51 

35.167.621 

14.45 

1864 

38,746.439 

12.24 

44.258.461 

14.00 

51,557,9.54 

16.29 

1865 

28,777,028 

12.05 

35.137.244 

14.72 

48.030.634 

20.12 

1866 

46.114.499 

10.61 

60.669,119 

13.95 

72.481.508 

16.67 

1867 

41.684.616 

10.53 

50,697,276 

12.81 

65.387.466 

16.52 

1868 

39.366.270 

11.01 

51.719.723 

14.47 

77.878.9.50 

21.79 

1869 

47.663.754 

11.42 

52.924,832 

12.68 

95.073.003 

22.77 

1870 

55.615.202 

12.76 

54.081,091 

12.41 

96,081.635 

22.03 

1871 

66.799.655 

12.84 

63,618,372 

12.24 

103.225.752 

19.84 

1872 

91.715,359 

14.64 

76.745.348 

12.25 

121.746.757 

19.43 

1873 

94.293,376 

14.68 

83,364.065 

12.98 

122.063.864 

19.01 

1874 

73,366.563 

12.93 

94.264.481 

16.61 

119.618,137 

21.08 

1875 

78.891.769 

14.80 

90.018.885 

16.89 

113.145.852 

21.23 

1876 

66.370,245 

14.41 

94,186,516 

20.44 

91.927.320 

10.05 

1877 

69,592.668 

15.42 

86.134,465 

19.08 

114,579.052 

25.39 

1878 

72,485.326 

16.58 

84,399.969 

19.31 

102.034,859 

23.34 

1879 

73.328.788 

16.45 

82.283.989 

18.46 

102,659.926 

23.03 

1880 

131.861.617 

19.74 

100.297.040 

15.01 

118.125.216 

17.60 

1881 

114.244.631 

17.77 

102.486.852 

15.95 

123.380.388 

19.20 

1882 

131.356,113 

18.13 

104.947.672 

14.49 

139.438.506 

19.24 

1883 

133.612.4.50 

18.48 

93.091.358 

12.87 

142.127.026 

19.65 

1884 

119.150.641 

17.84 

103.010.830 

15.43 

130.778.286 

19.59 

1885 

106.774.553 

18.49 

93,345.583 

16.16 

102.037.033 

17.82 

1886 

128.434.759 

20.22 

91,588,644 

14.41 

112.771.436 

17.75 

1887 

143.361.050 

20.71 

106..362.234 

15.36 

111.714.382 

16.14 

1888 

155.057.432 

21.42 

116,087.107 

16.03 

111.048.075 

15.34 

1889 

163.548.106 

21.94 

123.130.984 

16.53 

122.254.266 

16.41 

1890 

170.637.250 

21.62 

128.480.142 

16.28 

133.332.031 

16.89 

1891 

184.175.197 

21.80 

150.639.399 

17.83 

147.721.884 

17.48 

1892 

188.317.595 

22.76 

175,558.861 

21.22 

130.704,773 

16.89 

1893 

209.277.112 

24  16 

131,663,968 

15.19 

153.739.181 

17.75 

1894 

130.086.011 

19.86 

133,309,989 

20.35 

155.348.824 

23.72 

1895 

180.939.902 

24.72 

141,377.238 

19.31 

107.026.180 

14.63 

1896 

197.646.852 

25.35 

1.30.002.310 

16. (-,7 

118.805.703 

15.24 

1897 

196.159.371 

25.66 

128.379.785 

16.79 

129.244.951 

16.90 

1898 

189.322.244 

30.73 

103.984.608 

16.88 

86.091.010 

13.97 

1899 

208.565.691 

29.91 

98.933.256 

14.19 

123.448.135 

17.71 

1900 

276.241,152 

32.50 

97.916.293 

1 1 .52 

133.027.374 

15.65 

1901 

248,006,751 

30.13 

110.385.208 

13.43 

125.540.654 

15  25 

1902 

303,001.868 

33.55 

120.280.302 

13.31 

95.350.256 

10.56 

1903 

330.491.084 

32.22 

1 19.202.674 

11. ()2 

116.620.623 

11.37 

1904 

320.794^431 

32.37 

132.223.895 

13.34 

118.222.862 

11.03 

1905 

389.160.658 

34.82 

146.130.903 

13.08 

145.355.839 

13.01 

1906 

414.687.999 

33.81 

134.315.448 

10.0.-, 

140.35S.114 

11.44 

1907 

477.027.174 

33.25 

149.747.693 

10.44 

158.6.56.263 

11.06 

1908 

363.482.258 

30.43 

145.577.427 

12.19 

14  7.008.870 

12.31 

1909 

451.359.259 

34.40 

164.110.674 

12.51 

165.700.920 

12.63 

1910 

566.270.770 

36.37 

144.776.636 

9.30 

181.. -.66. 57  2 

11.66 

1911 

511.362.140 

33.48 

181.194.863 

11.87 

172.006. .501 

11.26 

1912 

555.986.041 

33.63 

2.30.358.2.30 

13.93 

106.100,60S 

11.86 

1913 

635.210.201 

35.04 

211.746.500 

1 1 .68 

104.243.220 

10.72 

1914 

632.865.860 

33.42 

247.947.621 

13.09 

227.644.320 

12.02 

1915 

575.357.144 

34.38 

223.929..')64 

13.3S 

2Sr>.725.001 

17.07 

1916 

94  8.825.500 

43.17 

251.8,86.746 

11. 4r. 

310.038.181 

14.14 

1917 

1.109.704.565 

41.73 

335.573.042 

12.62 

343.435.475 

12.91 

1918 

1.230.252.4.30 

41.76 

372.681.751 

12.65 

3.S0. 227.084 

12.01 

1919 

1.674.182.024 

42.88 

545.300.293 

13.97 

555.609.249 

14.23 

Imported  merchandise,  classified 

by  great  groups- 

—Continued. 

Manufactures  for 

M  a  nufactures 

further    use    in 

ready   for  con- 

Miscellaneous. 

manufacturing. 

sumption. 

Year. 

Total  value. 

Per 

I'er 

Per 

Value. 

cent 
of 

Value. 

cent 
of 

Value. 

cent 
of 

total. 

total. 

total. 

Dollars. 

Dollars. 

Dollars. 

Dollars. 

. .1800 

.  .1810 

4.'oV9,6«4 

7.48 

'36,998,966 

.56.86 

556.709 

Y.62 

"54,520.834 

. . 1820 

5.152,486 

8.22 

35,734.837 

56.97 

582.563 

.93 

62.720,956 

. . 1830 

11,359.196 

11.56 

44,300,005 

45.09 

630,094 

.64 

98,258,706 

..1840 

26.163.152 

15.08 

95.312.499 

54.93 

845,174 

.49 

173.509.526 

..1850 

34,720.080 

13.47 

128.959,080 

30.02 

904,915 

.35 

257.808.708 

..1855 

34.899,303 

9.87 

172,128,991 

48.68 

1,314.528 

.37 

353,616.119 

..I860 

32.613.807 

11.27 

132.272.902 

45.72 

1,244:425 

.43 

289.310.542 

..1861 

23.773.633 

12.56 

65.697.925 

34.69 

895.661 

.47 

189,356,677 

..1862 

35.148.512 

14.45 

95,009,168 

39.04 

.596.986 

•I.', 

243.335.815 

..1863 

52.280.953 

16.52 

128.449,577 

40.59 

1,153.899 

.36 

316,447.283 

..1864 

29,902,363 

12.52 

96.138.098 

40.27 

760.213 

.32 

238.745.580 

. .1865 

55.840.774 

12.84 

198.128.401 

45.57 

1,577.765 

.36 

434.812.066 

..1866 

55,665.853 

14.07 

180.510,320 

4.J.61 

1,809.565 

.40 

395,761.096 

. . 1867 

53.435,379 

14.95 

133.432.080 

37.33 

1.604,029 

.45 

357,436,440 

. . 1868 

62,650.909 

15.01 

156.555,462 

37.49 

2,638,419 

.63 

417.506,379 

..1869 

72,228.206 

12.75 

173,614.888 

39.82 

996.521 

.23 

435,958,408 

..1870 

13.88 

203,483,271 

39.11 

10.868.428 

2.09 

520.223,684 

..1871 

96.641.675 

13.98 

237,928.516 

37.97 

10.852.450 

1.73 

626,595.077 

..1872 

15.05 

232,108,020 

36.15 

13.665.210 

2.13 

642,136.210 

..1873 

63,411.606 

12.67 

192,431,867 

33.92 

15.811,796 

2.79 

567,406,342 

. .1874 

51.087.445 

11.89 

177,891,440 

33.38 

9,645.884 

1.81 

533.005.436 

..1875 

48,531,632 

11.09 

145.691.808 

31.62 

11.477.847 

2.49 

460,741,190 

..1876 

46,500,681 

10.75 

125.654.539 

27.84 

6.830.770 

1.52 

451,323,126 

..1877 

55.569,071 

10.66 

124,785,193 

28.55 

6,845.504 

1.56 

437.051,532 

..1878 

49,092,449 

11.15 

130.145,818 

29.19 

7,606.805 

1.72 

445,777,775 

,.1879 

110,779.510 

16.59 

196.587.405 

29.43 

10,303.952 

1.54 

667,954.746 

..1880 

87,790.890 

13.66 

203.725,925 

31.70 

11,035.942 

1.72 

642,664.628 

..1881 

98,623,766 

13.61 

238.716,691 

32.94 

11.5.56,826 

1.59 

724.639.574 

. . 1882 

98.755.423 

13.66 

242.945.562 

33.59 

12,648.195 

1.75 

72.3.180.914 

..1883 

94.698.249 

14.18 

207.771,072 

31.12 

12.288,615 

1.84 

667,697.693 

.  .1884 

78.254.677 

13.55 

182,.543.076 

31.61 

13.671,507 

2.37 

577,527,329 

..1885 

91.539.244 

14.40 

194.791.568 

30.65 

16,310.485 

2.57 

635.436.136 

..1886 

120.079.754 

17.34 

202,800,073 

29.29 

8.002.275 

1.16 

692.319.768 

..1887 

121.605.094 

16.80 

211.218.652 

29.17 

8,940,754 

1.24 

723,957.114 

..1888 

115.079.918 

15.44 

212.482,518 

28.52 

8.635.860 

1.16 

745,131,652 

..1889 

116,924.080 

14.81 

230,685.581 

29.23 

9,251.325 

1.17 

789,310.409 

..1890 

136,446.309 

16.15 

217.577.775 

25.75 

8.355.632 

.99 

844,916.196 

..1891 

112,729.303 

13.63 

204,543.857 

24.72 

6.458.073 

.78 

827,402,462 

..1892 

135.608.418 

15.65 

228.764.866 

26.40 

7.347.377 

.85 

866.400.922 

. .1893 

82.894.732 

12.65 

148.798,021 

22.72 

4.557,045 

.70 

654.994.622 

. .1894 

96.486.622 

13.18 

199,543,108 

27.26 

6.596.915 

.90 

731.960.965 

. .1895 

101.070.937 

12.96 

226.639.759 

29.07 

5.559.113 

.71 

779.724,674 

. . 1 896 

88,490.406 

11.57 

217.843.918 

28.48 

4,611.981 

.60 

764,730.412 

..1897 

79.288.417 

12.88 

153.025.210 

24.84 

4,338,165 

.70 

616.049.654 

..1898 

91.953,914 

13.19 

169.516,630 

24.32 

4.730.863 

.68 

697,148,489 

..1899 

134.222.045 

15.79 

203.126.341 

23.90 

5,407.979 

.64 

849.941,184 

..1900 

127.576.924 

15.49 

205,505.580 

24.96 

6,157.048 

.74 

823,172,165 

..1901 

147.656.292 

16.34 

231,420.820 

25.62 

5,611,410 

.62 

903,320.948 

. .1902 

195.7.'>0.847 

19.08 

257.757.184 

25.13 

5.806.825 

.58 

1,025,719.237 

. .1903 

160.233.890 

16.17 

252.857.673 

25.51 

6.754.620 

.68 

991.087.371 

. .1904 

177.827,960 

15.91 

252.372.650 

22.58 

6.665.061 

.60 

1.117.513.071 

, , 1 905 

220.298.751 

17.96 

.307.801.154 

25.10 

9.100.980 

.74 

1.226.562.446 

. ,1906 

274.096.464 

19.11 

364.192.884 

25.39 

10.700.947 

.75 

1.434.421,425 

. .1907 

196.248.409 

16.43 

331.617.926 

27.77 

10.406,902 

.87 

1,194,341.792 

. .1908 

222.101.622 

16.94 

299.106.235 

22.80 

9.541.514 

.72 

1,311,920.224 

. .1909 

285.138.373 

18.31 

367.723.367 

23.62 

11.471.712 

.74 

1.556.947.430 

.  .1910 

287.785.652 

1S.84 

361.422.180 

23.67 

13,454.769 

.88 

1.527.226.10.- 

.  .1911 

293.739.134 

17.77 

360.01  s. or,.-'. 

21.78 

17.061. 95s 

1.03 

1.653.264.934 

.  .1012 

349.401.928 

19.27 

408.178.704 

22.51 

14.227.681 

.78 

1.813.008.234 

.  .1913 

319.27.".  48'* 

16.86 

449.318.214 

23.72 

16.874.145 

.89 

1.893.925.657 

. .1914 

237.176.522 

14.17 

335.«76.628 

20'04 

16.104.791 

.96 

1.674.169:740 

. .1915 

356.S57.137 

16.24 

311.870.962 

14.19 

17.504.984 

.80 

2.197.883.510 

. .1916 

477.730.500 

17.96 

377.256.553 

14.19 

15.655.041 

.59 

2.659..3.-.5.18.^ 

. .1917 

540.742.1<«2 

18.36 

402.670.415 

13.67 

19.081  ..--,41 

.6." 

2.94  5.655.40.'^ 

. .1918 

600.898.703 

15.62 

192.769.389 

12.66 

26.515,274 

.68 

3.904.364.932 

. .1919 

Shipping 

Miles  of 
railway 
in  opera- 
tion. 

Patents 
issued. 

Year. 

Built. 

lingaged 
in  for- 
eign trade 
and 

lingaged 
in  coast- 
wise trade 
and  cod 

Immi- 
grants 
arrived. 

whale 
fisheries. 

and 
mackerel 
fisheries. 

Gro88 

Gross 

Gross 

tons. 

tons. 

tons. 

Number. 

Number. 

1800.. 

106.261 

670.573 

301.919 

1810. . 

127,575 

984.608 

440,175 

1820.. 

51.394 

620.102 

660.065 

8,385 

1830.. 

58.560 

577.268 

614.508 

■  ■  ■  23 

23,322 

1840.. 

121.203 

899,765 

1,280,999 

2,818 

473 

84.066 

1850.. 

279.255 

1,585,711 

1.949,743 

9,021 

993 

369,980 

1855.. 

.583,450 

2.535.206 

2,676.795 

18,374 

2,013 

200,877 

I860.. 

214.797 

2,546,237 

2,807,631 

30.626 

4,778 

150.237 

1861.. 

2.33.194 

2.642.628 

2,897,185 

31,286 

3.329 

89,724 

1862. . 

175,075 

2,291,251 

2,830.913 

32.120 

3,532 

89,007 

1863.. 

311.045 

2.026,114 

3,128,942 

33.170 

4,184 

174.524 

1864.. 

415.740 

1.581,894 

3,404,506 

33,908 

5.025 

193,195 

1865.. 

394,523 

1,602.583 

3,494,199 

35.085 

6.616 

247,453 

1866.. 

.3.36.146 

1.492.926 

2.817,852 

36.801 

9.458 

314.917 

1867.. 

305.595 

1.. 568.032 

2.736.455 

39,050 

13.026 

310,965 

1868.. 

285.304 

1,565,732 

2.786.027 

42,229 

13.410 

138,840 

1869.. 

275.230 

1.566.422 

2.578,219 

46.844 

13.997 

352,768 

1870.. 

276.953 

1.516.800 

2,729,707 

52,922 

13.333 

387,203 

1871.. 

273.226 

1,425.142 

2.857,465 

60.301 

13.056 

321,350 

1872. . 

209.052 

1.410.648 

3.027,099 

66.171 

13,613 

404.806 

1873.. 

359,245 

1.423.288 

3.272.739 

70,268 

12,864 

459.803 

1874,. 

432,725 

1,428,923 

3.371.729 

72,385 

13,599 

313,339 

1875.. 

297.638 

1.553,827 

3.299,905 

74,096 

14,837 

227.498 

1876.. 

203.585 

1,592.821 

2,686,637 

76.808 

15.595 

169,986 

1877.. 

176.591 

1.611,193 

2,631,407 

79.082 

14,187 

141,857 

1878.. 

2.35.503 

1.629.048 

2.583,717 

81.747 

13,444 

138,469 

1879.. 

193.030 

1.491.534 

2.678,067 

86..556 

13.213 

177,826 

1880.. 

157.409 

1.352.810 

2.715.224 

93.267 

13.947 

457,257 

1881.. 

280.458 

1.335.586 

2,722,148 

103,108 

16.584 

669,431 

1882.. 

282.269 

1.292.294 

2.873.639 

114.677 

19,267 

788,992 

1883.. 

265.429 

1,302.095 

2.933.392 

121.422 

22.383 

603.322 

1884.. 

225.514 

1.304,221 

2.967,008 

125,345 

20,413 

518,592 

1885.. 

159.056 

1.287.998 

2.977.936 

128,320 

24,233 

395.346 

1886.. 

95.453 

1.111.179 

3.019,957 

136,338 

22.508 

334.203 

1887.. 

150.450 

1.015.563 

3.090.282 

149.214 

21,477 

490.109 

1888.. 

218.086 

943.784 

3.248,132 

156.114 

20.506 

546.889 

1889.. 

231.134 

1.021,595 

3.285.880 

161,276 

24,158 

444.427 

1890.. 

294,122 

946.695 

3,477,802 

167.191 

26.292 

455.302 

1891.. 

369.302 

1.005.950 

3,678.809 

172.035 

23.244 

.560.319 

1892.. 

199.633 

994.676 

3.770.245 

175.691 

23,559 

623,084 

1893.. 

211.639 

899.803 

3.925.268 

179.834 

23.769 

502,917 

1894. . 

131,195 

916.180 

3.767,849 

18-2,733 

20,857 

314.467 

1895.. 

111.602 

838.186 

3,797,774 

184,628 

22.057 

279.948 

1896.. 

227.096 

844.954 

3.858,926 

186,681 

23.273 

343.267 

1897.. 

232,232 

.'*05.584 

3.963,436 

188,844 

23.794 

230.832 

1898.. 

180!458 

737.709 

4.012,029 

190.870 

22.267 

2-29.299 

1899.. 

300.038 

848.246 

4.015.992 

194.336 

25.527 

311,715 

1900. . 

.393.790 

826.694 

4.338.145 

198.964 

26.499 

448.572 

1901. . 

483,489 

889.129 

4.635.089 

202.28S 

27.373 

487,918 

1902. . 

468.833 

882.555 

4.915.347 

207.253 

27.886 

,  648,743 

1903. . 

436.152 

888.776 

5.198,569 

213.422 

31.699 

857.046 

1904. . 

378.542 

898.768 

5.392,767 

220.112 

30.934 

812,870 

1905.. 

330.316 

954.513 

5,.502,030 

2-25.196 

30.399 

1,026.499 

1906.. 

418.745 

939,486 

5.735.4S:{ 

•2.30.761 

31.965 

1,100,735 

1907. . 

471.332 

871.146 

6,067.648 

236.940 

36,620 

1,285.349 

1908. . 

614.216 

940.068 

6,425,377 

240,846 

33.682 

782,870 

1909.. 

238.090 

S87.505 

6.501,2.50 

244.084 

37.421 

751,786 

1910. . 

342.068 

791.825 

6.716.257 

249.992 

35.930 

1,041.570 

878,587 

1911.. 

291.162 

S72,671 

6.766.119 

-254.732 

34.084 

1912. . 

232.669 

932.101 

6.782.082 

258.033 

37.731 

838,172 

1913. . 

346.155 

1.027.776 

6.858,775 

•261.036 

35.788 

1,197,892 

1914.. 

316.250 

1.076.152 

6.845,063 

-263.547 

41.8.50 

1,218,480 

1915.. 

225.122 

1.S71.543 

6.51 7. SS6 

-264.378 

44.934 

326,700 

1916.. 

325.413 

•-'.191.715 

6.277.934 

266.0.".  1 

45.927 

298,826 

1917. . 

664,479 

•-'.4-16.399 

6.424.638 

266.059 

42.760 

295,403 

1918.. 

1.300.868 

3.603.706 

6.320.812 

39.941 

110.618 

1919. . 

3.326.621 

0.669,726 

6.237.574 



38,598 

141.183 

COLLATERAL  READING 


COLLATERAL  READING 

This  work  differs  from  most  of  the  historical  manuals  of 
the  present  day  in  that  no  space  has  been  devoted  to  long 
lists  of  "references  for  further  reading"  on  specific 
subjects.  It  must  not  be  understood  that  the  author  does 
not  believe  further  reading  essential  and  desirable.  He 
simply  has  an  aversion  to  the  prevailing  custom  of  telling 
students  where  to  find  information  on  topics  assigned  for 
special  investigation,  believing  that  the  average  student  is 
likely  to  derive  much  more  benefit  from  hunting  for  the  in- 
formation than  from  the  information  itself.  There  are 
numerous  repositories  of  bibliographical  material — guides, 
lists,  indexes,  catalogues,  and  other  special  works — devoted 
wholly  to  bibliography.  These  publications  afford  much 
more  reference  material  than  can  be  conveniently  included 
in  a  text-book.  Many  of  them  are  regularly  revised,  en- 
larged and  brought  down  to  date.  The  student  should  seek 
out  works  of  this  nature  and  learn  to  use  them. 

For  regular  supplementary  reading  the  student  will  find 
especially  valuable  Callender's  Selections  from  the  Eco- 
nomic History  of  the  United  States  and  Bogart  and 
Thompson's  Readings  in  the  Economic  History  of  the 
United  States.  The  former  covers  only  the  time  previous 
to  1860.  The  Statistical  Abstract  of  the  United  States, 
published  annually  by  the  Bureau  of  Foreign  and  Domestic 
Commerce,  is  a  cheap  and  convenient  source  of  statistical 
information  which  may  well  be  used  regularly  as  a  basis  for 
exercises  in  the  preparation  of  graphs  and  charts. 

641 


642  COLLATERAL  READING 

For  collateral  reading  of  an  extensive  nature  the  student 
should  widen  his  acquaintance  with  works  of  fiction,  travel, 
description,  biography  and  autobiography.  The  following 
short  list  of  books,  grouped  roughly  according  to  the  periods 
with  which  they  deal,  is  offered  as  a  working  basis  for  such 
collateral  reading.  Books  of  fiction  are  given  without 
dates, 

I.  Exploration  and  Colonization. 

Justin  Winsor,  Christopher  Columbus  and  How  He  Re- 
ceived and  Imparted  the  Spirit  of  Discovery. 
(1891). 

Lew  "Wallace,  The  Fair  God.  (Spanish  conquest  of 
Mexico). 

Charles  Kingsley,  Westward  Ho!  (English  adventurers  in 
the  Spanish  Main,  sixteenth  century). 

Mary  Johnston,  To  Have  and  to  Hold;  Prisoners  of  Hope; 
Audrey.     ( Early  Virginia ) . 

Washington  Irving,  Knickerbocker's  History  of  New  York. 
(Humorous  account  of  Dutch  life  in  New  York). 

II.  Colonial  Life  and  the  Revolution. 

Benjamin  Franklin,  Autobiography.     (Many  editions). 

J.  K.  Hosmer,  Samuel  Adams.     (1884). 

M.  C.  Tyler,  Patrick  Henry.     (1887). 

Paul    Leicester    Ford,    The    True    George    Wfishington. 

(1896). 
Henry  Cabot  Lodge,  George  Washington.     2  vols.     (1889). 
R.  G.  Thwaites,  Daniel  Boone.     (1902). 
W.  G.  Sumner,  Robert  Morris.     (1892). 
Archibald    Henderson,    Conquest   of    the   Old   Southwest. 

(1920). 


COLLATERAL  READING  648 

Alice  Morse  Earle,  Stagecoach  and  Tavern  Days.     (1900). 

Colonial  Dames  and  Goodwives.     (1895), 

Home  Life  in  Colonial  Days.     (1899). 
James  Fenimore  Cooper,  Leatherstocking  Tales.     (Frontier 

life    and    Indian    wars,    latter    half    of    eighteenth 

century). 

The  Spy.     (Revolutionary  War). 

The  Pilot.     (Paul  Jones  and  naval  warfare  during 

the  Revolution). 
Gilbert  Parker,  Seats  of  the  Mighty.     (French  and  Indian 

War). 
Maurice  Thompson,  Alice  of  Old  Vincennes.     (Conquest  of 

the  Northwest  Territory  by  George  Rogers  Clark). 
J.  P.  Kennedy,  Horseshoe  Robinson.     (Revolutionary  War 

in  the  South). 
S.  Weir  Mitchell,  Hugh  Wynne.     (Revolutionary  War). 
Nathaniel    Hawthorne,    Twice    Told    Tales.     (Stories    of 

colonial  New  England). 
W,  M.  Thackeray,  The  Virginians.     (English  and  colonial 

life  in  the  eighteenth  century). 
Winston  Churchill,  Richard  Carvel.     (Revolutionary  War 

in  England  and  America). 
E.  L.  Bynner,  Ths  Begum's  Daughter.     (Leisler's  rebellion 

in  New  York). 

III.  Early  National  Period. 
J.  T.  Morse,  Jr.,  Thom.ns  Jefferson.     (1883). 
James  Schouler,  Alexander  Hamilton.     (1901). 
R.  H.  Thurston,  Robert  Fulton.     (1891). 
Henry  Adams,  John  Randolph.     (1882). 

Life  of  Albert  Gallatin.     (1879). 
R.  G.  Thwaites  (ed.),  Original  Journals  of  the  Lewis  and 

Clark  Expedition.     Eight  vols.     (1904-05). 


644  COLLATERAL  READING 

Gertrude  Atherton,  The  Conqueror.  (Alexander  Ham- 
ilton). 

James  Lane  Allen,  The  Choir  Invisible.  (Early  days  in 
Kentucky). 

Winston  Churchill,  The  Crossing.  (Occupation  of  the 
Louisiana  Purchase). 

Mary  Johnston,  Lewis  Rand.     (Aaron  Burr's  Conspiracy). 

Irving  Bacheller,  D'ri  and  I.     (War  of  1812). 

IV.  War  op  1812  to  Civil  War. 
Nicolay  and  Hay,  Abraham  Lincoln.    Abridged  edition. 

(1902). 
Carl  Schurz,  Abraham  Lincoln.     (1891), 
Joseph  M.  Rogers,  The  True  Henry  Clay.     (1904). 
Hermann  von  Hoist,  John  C.  Calhoun.     (1882). 
W.  G.  Sumner,  Andrew  Jackson  as  a  Public  Man.     (1882). 
John  B.  McMaster,  Daniel  Webster.     (1902). 
R.    H,    Dana,    Two    Years    before    the    Mast.     (Several 

editions). 
Charles  Dickens,  American  Notes.     (Several  editions). 
Mark  Twain,  Life  on  the  Mississippi.     (Several  editions). 

Roughing  It.     (Several  editions). 
Edward    Eggleston,     The    Hoosier    Schoolmaster;      The 

Circuit  Rider.     (Early  settlements  of  Indiana). 
Winston  Churchill,  The  Crisis.     (The  Civil  War). 
Harriet    Beecher    Stowe,    Uncle    Tom's    Cabin.     (Negro 

Slavery). 
Mark  Twain,   Huckleberry   Finn.     (Southern   Mississippi 

Valley). 
Charles  Dickens,  Martin  Chuzzlewit.     (English  immigrants 

in  the  Mississippi  Valley). 
Joseph  Hergesheimer,  Java  Head.     (Commerce  with  the 

Orient) . 


COLLATERAL  READING  645 

Frank   Bullen,    The   Cruise   of   the    Cachalot.     (Whaling 

industry). 
Irving    Bacheller,    A    Man    for    the    Ages.     (Abraham 

Lincoln). 

V.  Since  the  Civil  War. 

Hamlin  Garland,  A  Son  of  the  Middle  Border.     (1917). 

Henry  Adams,  Education  of  Henry  Adams.     (1918). 

Theodore  Roosevelt,  Autobiography.     (1913). 

Andrew  Carnegie,  Autobiography.     (1920). 

E.  P.  Oberholzer,  Jay  Cooke,  Financier  of  the  Civil  War. 

(1907). 
R.  W.  Gilder,  Grover  Cleveland.     (1910). 
Meredith  Nicholson,   The   Valley  of  Democracy.     (1918). 
Ida  M.  Tarbell,  History  of  the  Standard  Oil  Company. 

2  vols.     (1904). 
Frank  Norris,  The  Pit.     (Speculation  in  wheat). 

The  Octopus.     (Railroad  domination  in  the  South- 
west) . 
Joseph  Hergesheimer,  Three  Black  Penny s.     (Evolution  of 

the  steel  industry). 
Thomas  Dixon,    The    Clansman.     (Reconstruction   in   the 

South). 
G.  W.  Cable,  The  Cavalier.     (Civil  War  from  Southern 

point  of  view). 
Thomas  Nelson  Page,  Red  Rock.     (Reconstruction  period). 
Owen  Wister,    The    Virginian.     (Ranch   life   in   the   Far 

West). 
Winston  Churchill,  Coniston.     (Railroads  and  politics  in 

New  Hampshire). 
Ernest  Poole,  The  Harbor.     (Labor  Troubles  in  the  port 

of  New  York). 


646  COLLATERAL  READING 

Rudyard  Kipling,  Captains  Courageous.  (Codfishing  in- 
dustry), 

Arthur  Train,  The  Earthquake.  (Economic  conditions 
during  the  World  War). 


INDEX 


INDEX 


Absentee  Managers,  514,  515 
Act  of  1660  (shipping),  70 
Act  of  1663   (shipping),  82 
Act  of   1673    (shipping),  83 
Act  of  1606   (shipping),  83 
Adams,  John,  132,  162 
Adams,  J.  Q ,  256,  259,  264,  266, 

274 
Adams,    Samuel,    130,    132,    143; 

portrait,  133 
Adams  Express  Co.,  349 
Addyston  Pipe  pool,  464.  526 
Adriatic    (ship),   369    (ill.),   370 
Adulteration,  524 
Advisory  Commission,  602 
African  pirates,  168 
African  trade  with  West  Indies 

and  colonies,   105 
Age  of  Steel,  543 
Agricultural      machinery*,      329, 
332;     improvement,    390,    417, 
553 
Agricultural   scliools   and  experi- 
ment stations.  561 
Agriculture,  8;  before  1807,  222; 
colonics.    92;    condition,    1897- 
1914.     550;      expansion     after 
Revolution,  183;  expansion  in, 
1840-60,  329:    large   scale   pro- 
duction;    410;     New    England, 
early.  04;   Virginia  colony,  55 
Agriculture.  Dept.  of,  557 
Air  brake,  393,  432 
Airplane.  606 
Akron,  Ohio,  546 
Alaska.  549 
Albany,  X.  Y..  27,  344 
Albcmiarlp,  Duke  of,  43 
Aldrich   report  of   1893,  404 
Aldrieh-Vreeland  Emergency  Cur- 
rency Law,  582.  591 
Alexander,  Pope,  22 
Alien  Contract  Labor  Law,  459 
Allen.  Horatio,  280 
Aluminum,  9 
America,  appropriation,  22;   dis 


covery,    18;    See    also    United 
States 
American  Express  Co.,  349 
American    Federation    of    Labor. 

451,  618,  619 
American  flag,  577,  578 
American  Railway  Union,  455 
American     Sugar     Refining     Co., 
473 ;    See    also    Sugar ;    Sugar 
Trust 
American   System,  253,  258,  263 
American  Tobacco  Co.,  503,  508, 

530;    Supreme  Court  on,  531 
Americanism  in  1811,  219 
Americans,  character,  6,  15;  stock 

and  origin,  14 
Amherst,  Lord,   117 
Amiens,  Treaty  of,  212 
Amory,  Thomas,  105 
Anarchists,  453 
Animal  life.   13 
Animals,  wild.  14 
Annapolis,     commercial     conven- 
tion, 175-176 
Anthracite,    2.10,    295,   296,    341; 

pool,  463;   See  also  Cbal 
Anthracite  tide-water  canals,  267, 

269 
Appalachian  highlands,  8,  9 
Appleby,  J.  F,  417 
Arbitration  of  labor  troubles,  457 
Arctic   (ship),  370 
Argall,  Captain,  59 
Arkansas,  286 
Arkwright,  Richard.  196 
Articles    of    Confederation,    139, 

172 
Asphalt    Company    of    America, 

512 
Atlantic  cable,  349 
Atlantic  coast,  10.  22,  90,  111 
Atlantic  coastal   plain,   8 
Attorney-General,   189 
Austerlitz.  213 

Automatic  air  brake  and  coupler, 
393 


649 


650 


INDEX 


Automobile  industry,  545 
Automobiles,    431;    better    roads 
and,    568;     first    Pierce-Arrow 
(ill.),    430;     Packard    factory 
(ill.),  548;  Buick   (ill.),  547 

Back  lands,  223 

Balance  of  trade,  495.  497 ;  in 
1878-98,  485;  in  World  War, 
593 

Balboa,  O.  N.  de,  21 

Baldwin,  Matthias,  282 

Baltimore,  Md.,  92,  246,  274,  277, 
278 

Baltimore,  Lord,  42 

Baltimore  and  Ohio  R.  R.,  277, 
281,  344,  346,  394;  first  passen- 
ger car  (ill.),  279;  spot  where 
construction  was  begun  (ill.), 
281;  strike  in  1877,  447 

Bank  Credit,  305 ;  See  also  Credit 

Bank  notes,  231,  245,  246,  305, 
353,  385,  477,  579 

Bank  of  Massachusetts,  191 

Bank  of  New  York,  191 

Bank  of  North  America,  191 

Banking,  245;  Establishment  of 
national  system  after  Civil 
War,  385;  Federal  Farm  Land 
Banks,  587 ;  Federal  Reserve 
Sj'stem,  583;  methods,  193; 
State  regulation,  352;  unsound, 
304,  312 

Banks,  early,  191;  State,  231 

Barbary  Pirates,  183;  suppres- 
sion,'212 

Barbary  States,  168 

Barbed  wire,  424-425 

Beef  Trust.  503.  513 

Belgium,  590,   599 

Bell,  A.  G.,  427;   portrait,  428 

Bellamy,  Edward,  460 

Bellmont,  Earl  of,  47 

Berkeley,  Lord,  43 

Berlin  Decree,  215,  218,  219 

Bermuda,  79 

Bessemer,  Henry,  338 

Bessemer  Steel,\395,  544 

Biddle,  Nicholas,  308,  309,  310, 
318 

Big  business,  509.  510;  opposition 
to  Rooseyelt,  526;  public  and, 
516 


Bills  of  exchange,  107 

Bimetallic  monetary  system,  480 

Birmingham,   Ala.,  9,  425 

Birth  rate,  colonial,  90 

Bituminous  coal,  296;  See  also 
Coal 

Black  Ball  line,  300 

Black  Friday,  403 

Black  Friday  of  1873,  410 

Black  Tariff,  258 

Blacklists,  456,  457 

Blessing  of  the  Bay,  The  (ship), 
67 

Blockade,  American  coast  by 
British,  231,  233;  British  Isles 
and  Napoleon,  215;  Europe  in 
1806,  214;  Germany  by  Britain 
in  1914.  591;  South  in  Civil 
War,  378 

Boats,  colonial.  111 

Boiling  Spring.   156 

Bonanza   farms,  417 

Bonds,  Government,  191 ;  issues 
of  1894-96,  495;  measure  of 
March,   1900,  581;    State,  266 

Boone,  Daniel,  154,  155;  porti;ait, 
153 

Boonesborough     (with    ill.),    155 

Boston,  colonial  postal  service, 
113.  115;  first  ship,  67;  police 
strike,  619;  port  closed,  132; 
settlement,  41;  Stamp  Act  and, 
123,   125 

Boston  and  Worcester  railroad, 
344 

Boston  Massacre,  129 

Boston  Tea  Party.  130 

Boundaries,  Florida,  160,  161 ; 
Northern,  326;  of  United 
States  by  peace  of  1783.  160; 
states  in  early  times,   159 

Bounties,  colonial,  85 

Boycott.    455.    456.   457 

Braddock,   Edward,   113 

Bradford,   Governor,   65 

Braintree,  Mass.,  71 

Britain,  invasion  of  American 
neutral  rights  in  World  War, 
600;  Napoleon  and,  213;  naval 
supremacy.  591 ;  offensive  at- 
titude toward  America.  208. 
216;  Orders  in  Council  and 
Napoleon's      "Decrees,"      214; 


INDEX 


651 


policy  toward  America  in  1794, 
207,  208;  seizure  of  American 
Ships,  207 

British  army,  147;  soldiers  in 
colonies,   121,  128-129 

British  East  India  Co.,  130 

Brotherhood  of  Locomotive  En- 
gineers, 406 

Brougham,  Lord,  242 

Brush,  C.  F.,  427 

Buchanan.  James,  387 

Buffalo,  N.  Y.,  272;  grain  ele- 
vators   (ills.),  571,  572 

Buffalo  Bill,  364 

Building  operations  in  World 
War,  606 

Bunker  Hill  monument,  276 

Bureau  of  Corporations,  521,  525, 
530 

Burke,  Edmund,  134.  167 

Business,  organization,  15;  regu- 
lation bv  Government,  415,  469, 
518,  529;  State  regulation, 
532;  War  and,  241 

Business  combinations.  See  Com- 
binations 

Bute,   Lord,   120,    121 

By-products,  utilization,  421,  423 

Cables,  349 

Cabot,  John.  25 

Cabots  of   Beverly,   149 

Cadiz,  213 

Cahokia,    158 

Cairo,  18,  19 

Calhoun,    J.    C,    219,    237,    259; 

on  tariff  of  1816,  236 
California.  8.  320;    orange  grove 

(ill.),  552;  trade  with,  in  1840- 

60,  364 
Calvert,  Cecil,  43 
Calvert,  Ceorge,  42 
Canada,  107;   France  and,  24 
Canal   boat    (ill.),  272 
Canals.    201,    263;     constructive 

period.  267;  map  of.  2f)8;   Xew 

York  State  system   (ills.).  570; 

traffic  shrinkage  in  compotitinn 

with    railroads,    433;    western, 

274 
Canton.   China.   181 
Cape  Breton  Island,  29 


Cape  Cod  Canal,  571 

Capital  and  labor,  456,  457,  622; 
growth  of  amimosity,  514,  531 

Capitalists,   Karl   Marx   on,   459 

Capitalization,  511,  520 

Carbondale,  Pa.,  277 

Carlisle,  Secretary,  495 

Carnegie  Steel  Co.,  454 

Carolina,  43;  land  and  settlers, 
47 

Carpet-baggers,  399 

Carroll,   Charles,  278 

Cars,  large  scale  production,  433; 
steel,  563 

Carteret,  Sir  George,  43 

Cartier,  Jacques,  24 

Cartwright,   Edmund,   196 

Cattle,  13,  223;  driving  from 
the  West.  290,  361;  South 
Carolina,  94;  trade,  244;  Vir- 
ginia colonv,   62 

Central  Pacific  R.  R.  Co.,  386 

Champlain,  Lake,  29 

Champlain    Canal,    271 

Charcoal.   295 

Charles  I  of  England,  35,  41,  42, 
79 

Charles  II  of  England,  29,  35,  43 
44 

Charleston.  366 

Chase,  S.  P.,  379,  385;  portrait, 
380 

Chatham,  Earl  of.  See  Pitt, 
Wm. 

Cheap  money,  460,  480 

Cherokee   Indians,    154.    157.    158 

Chesapeake    (ship).   216,   220 

Chesapeake  and  Delaware  Canal, 
267 

Chesapeake  and  Ohio  Canal,  274, 
277 

Chesapeake  Bay,  73 

Cheves,    Langdon,    219 

Chicago,  272.  331.  332,  345.  407; 
grain  trade.  358,  418;  growth, 
359;  Haymarket  Square  riot, 
453;  Puilman  strike  in  1894, 
455;   rail  connections.   394 

Chicago  and  Alton  R.  R.,  511 

Chicago  Rolling  Mill,  397 

Child  labor.  533.  561.  606 

China,  first  ship  to,  181 


652 


INDEX 


Chinese  immigrants,  542 
Chinese   laborers,   459 
Chiswell,  Va.,  148 
Cincinnati,  224,   244,  261;   foun- 
dation, 184;  in  1810  (ill.),  244 
Cities,  gain   in  population,    541, 

551 
Civil   War,   373,   605;    conditions 
at    close,    388;    economic    con- 
ditions  during,   377 ;    financial 
program,      378 ;      fundamental 
cause,   323,  373;    results,  383; 
scandals  in  finance  consequent 
on,  402 
Clarendon,  Earl  of,  43 
Clark,  George   Rogers,   158,   159 
Clark,  William,  225 
Clay,   10 

Clay,  Henry,  219,  237,  258,  259 
American    system,    253,     258 
as  presidential  candidate,  308 
on    transportation,    263;    por- 
trait, 307 
Clayton  Anti-trust  Act,  536,  540 
Clearing-house     certificates,     582 
Clemens,  S.  L.,  363 
Clermont  (ship),  227,  228,  (ill.), 

283 
Cleveland,    272,    466,    545;    load- 
ing coal    (ill),  567;   unloading 
ore    (ill.),  569 
Cleveland,   Grover,  bankers'  syn- 
dicate,    496;     gold     standard, 
492,     494;     Nicaragua     Canal 
Board,     573;      portrait,     493; 
Pullman   strike,  455 ;    repudia- 
tion by  Democrats,  496;   tariff 
policy,  426 
Climate,  7 

Clinch  River,  154,   155 
Clinton,  DeWitt,  239,  270 
Clipper   Ships,  367    (with  ill.) 
Closed  Shop,  453,  620 
Clothing     industry,     335,     425; 

New  England,  early,  70 
Coal,    341,    434,    543,    555,    560; 
anthracite,      230;       anthracite 
and  bituminous,  295,   296 ;   de- 
posits   (map),   10;   regions,  8; 
Western  fields,  292 
Coal  gas,  296 
Coal  industry,  control,  623 ;  load- 


ing and  unloading  coal   (ills.), 
567;  strike  in  1919,  620 
Coasting    trade,     190,    233,    240, 

244,  298,  357,  569 
Codfish,   66;   importance  to  New 

England,  95-96 
Cody,  W.   F.,   364 
Coinage,    193;    debasement,    311; 
free   silver,   460;    new  laws   in 
1853,  351;   revision  of  system, 
310;   silver,  480 
C»ke,  338,  555;   ore-lime  and  by- 
product    ovens,     560;     by-pro- 
duct   ovens    at    Joliet     (ill), 
560;     old    style    ovens     (ill.), 
558;   ovens,  397 
Cold  storage,  419 
Collective    bargaining    618,    621, 

622 
Collins,  E.  K.,  369 
Collins  line,  369 
Colombia,  573,  574 
Colonial  Congress,  First,  132 
Colonies,    agriculture,    92;    com- 
mercial    expansion,     101;     de- 
velopment from    1660  to   1763, 
90;    early  industries  and  com- 
merce,   55;    England   and,   31; 
England's     fairness,     86,     88; 
England's    policy    toward,    88; 
English,  in  America,  27;  Eng- 
lish   economic    policy    toward, 
73,    75;    English    new   colonial 
policy     by     1763,      117,      120; 
English  relations  from  1660  to 
1763,     115;     extractive    indus- 
tries,    96;     farms,     48;     final 
break    with    England,    135;    in 
1660,  73;   industrial  and  trade 
encouragements,      85 ;       indus- 
tries,     restrictions,      84,      88; 
industry,     general      character, 
91 ;    labor    problem,    48 ;    land 
tenure,    45 ;    manufacture,    99 ; 
mercantile   system   applied   to, 
77;  monej^  and  exchange,  106; 
proprietary,   42;    resistance   to 
England,   123,  129;  ship  build- 
ing    progress,     97 ;     taxation, 
120;    transportation   and   com- 


INDEX 


653 


munication,    111;    union    lack- 
ing, 139 
Colonization,  difficulties  and  cost^ 

35;  motives,  33 
Columbia  River,   11 
Columbus,  Ohio,  451 
Columbus,    Christopher,    18;    his 
plan,   20;    new   world   and,   21 
Combination,      industrial,      415; 
anthracite    coal,    403;     begin- 
ning, 461  ;influence,  507;  labor 
movement  and,  514;  movement 
renewed  after  1896,  502;  prices 
and  profits,  512;  See  also  Pools 
Commerce,   American   in  Napole- 
onic    Wars,     206;     Annapolis 
convention,    175-176;    colonial, 
55,     85,     101 ;     colonial     "enu- 
merated" articles,  80,  83;  Con- 
gress,     regulation      by,      175; 
destruction      in      1807,      217; 
European  war  in   1914,   elTect, 
591;      growth      in      1793-1802, 
211;     intercolonial,     82;     New 
England,  early,  68 ;  Revolution 
and,  148;  sentiment  and,   165; 
See     also     Exports;      Foreign 
trade;  Imports;  Trade 
Commerce   and   Labor,   Dept.   of, 

521 
Commerce  Court,   530 
Commercial  companies  and  their 

agency  in  colonization,  34 
Commercial    crisis    in    1893,    492 
Commercial  treaties,  1782-85,  173 
Committees     of     correspondence, 

130 
Common  carriers,  ocean,  301 
Communal  system,  65 
Communism,  297,  340 
Communication,   colonial.   111 
Community  of  interest,  503,  537 
Competition.      471;      effects      in 
1873-97.  444:  Eliminating,  461, 
502;    industrial,   in    1873.   415; 
railroads  in   1869,  407;  unfair, 
507 
Conestoga    wagons,    200,     (ill.). 

224 
Confederate    States    of    America, 
373 


Conference    of    Governors,    557, 

558 
Congress,    appeal    to    States    for 
revenue-raising     power,      174; 
new    organization     under    the 
constitution,  187;  powers,  172, 
179;  regulation  of  foreign  com- 
merce,    175;     taxation    power, 
189 
Congress,  First  colonial,  132 
Connecticut,  colonial  iron  works, 
100,      101;      Settlement,      42; 
Western  lands,  159 
Conquistadores,   23 
Conservation  movement,  556,  606 
Constantinople,  18,  19 
Constitution,     U.     S.,     features, 
179;     new    government    begun 
under,    187;    ratification,    179, 
180 
Constitutional       convention       of 

1787,  177-178 
Continental  army,  135,  140 
Continental  Association,  133,  151 
Continental     Congress     of     1775, 

135;   powers,   139,   140 
Continental  Currency,  142 
Continental  System,  219 
Continuous  voyage,   doctrine   of, 

214 
Contraband  of  War,  207 
Contract   laborers,  458 
Control   of  prices,   401 
Cooke,  Jay,   380 
Cooke.  Jay,  &  Co.,  409 
Cooper,  Peter,  281 
Copper,   8.   9,    97,   341,   434,   543 
Cordage,  463 

Corn     (maize).    332,    552;    New 
England    colony.    64 ;     produc- 
tion  increase  after  Civil  War, 
419,  Virginia,  57 
Corn  Laws.  English.  81,  253,  359 
Coronado,  F.  V..  23 
Corporations,      230.      206,      503; 
political       contributions       and 
other    corrupt    practices,    509; 
Roosevelt  and.  520 
Corruption   of  muncipalities   and 

corporations,   509 
Cortes,    Hernando.    23 
Cotton.     British     manufacturers, 
197:   chief  market,   287;   crops 


654 


INDEX 


in  1897-1914,  552;  crops  in 
1915  and  1916,  597;  cultiva- 
tion, 148,  222;  culture  in  the 
South,  198;  culture  under  free 
labor,  420;  labor-saving  ma- 
chinery, 421;  price  and  culture 
after  War  of  1812,  242; 
slavery  and,   152,   199 

Cotton  gin,  195,   197,   198-199 

Cotton  manufacture  and  cotton 
mills,  228,  261,  334,  422  first; 
197;  New  England,  293; 
South,  425 

Cotton  seed,  421 

Cotton,  yarn,  197 

Council  for  New  England,  40,  41 

Council  of  National  Defense,  602 

Counterfeiting,    143 

Country  banks,  580 

Country  Life  Commission,  559; 
See  also  Rural  life 

"Country  pay,"  107,  108,  169 

Courts',    Federal,    189 

Coxey's  Army  of   1894,  461 

Cradle,  222 

Cream  Separator,  419.  420   (ill.) 

Credit,  141,  314,  443;  bank 
credit,  305;  expansion  in 
World  War,  608;  foreign,  315; 
national,  191;  aver-€xpansion, 
245,  304 

Credit  Mobilier,  401 

Creditor  nation,  593 

Crime  of  '73,  481 

Criminals.  49-50 

Crises,  578;  See  also  Panics 

Crompton,   Samuel.    196 

Crop,  failure  of,  1835,  314 

Crop-moving    season.    580 

Cumberland,  :Md.,  226.  448 

Cumberland   road,   245,   263,   264 

Cunard.   Samuel,   308 

Cunard  S.  S..  Co.,  368 

Cure-alls,   459 

Currency,  193,  304;  cheap  money, 
460;  colonial  shortage,  106; 
continental,  depreciation,  142; 
Continental,  early,  140  (ill.), 
141  (ill.)  ;  depreciation  in 
Civil  War,  381 ;  disorders  lead- 
ing to  the  panic  of  1893,  475; 
elasticity,  578,  579.  580 ;  emer- 
gency 591;    emergency  law  in 


1908,  582;  foreign  trade  and, 
in  1878-90,  484;  fractional 
paper,  .382;  in  1814,  232-233; 
legislation  in  1898  and  1900, 
497;  reforms,  351;  weakness  in 
1878,  483;  World  War  Expan- 
sion, 008 
Customs  districts,  190 

Dairy   industry,    419 

Dakota,  390 

Dale,  Sir  Thomas,  57 

Dallas,   Alexander,   234 

Dam  at  Keokuk,  la.,  11,  12 
(ill.) 

Davis,  JefTerson,  287 

Davis.  Phineas,  281 

De   Bow,  J.   D.   B.,   363 

Debt,  169,  300,  304;  States,  191; 
War.  624 

Debtors,  50,  109,  110,  145,  169, 
180,  579 

Declaration  of  Independence,  136 

Declaration  of   Rights,   132 

Declaration  of  Riglits  and  Griev- 
ances of  the  colonists  in  Amer- 
ica,  125 

Declaratory  Act,  126,  127 

De   Laval,' C.   G.,   419 

Delaware,  45 

Delaware  and  Hudson  Canal,  269, 
277 

Delaware  and  Raritan  Canal.  269 

Delaware  Division  Canal,  269 

Delaware  River,  steamboats  on, 
183 

Delaware  valley,  72 

Democracy,  16,  17;  in  England, 
118 

Depression,  business,  in  1785-6, 
168,  180;  in  1886,  452;  in 
1920-21,  617 

Derbys  of  Salem,  105.  149 

Despotism,   benevolent.   515 

Detroit,  159,  272,  .545;  Packard 
car  factory   (ill.),  548 

Development,  economic,  17;  how 
accomplished,  5 

DeWitt  Clinton  (locomotive), 
281,    283,    (ill.) 

Diaz,  Bartholomew,  20 

Dingley  Tariff  Act,  497,  501,  528 

Direct  action,  516 


INDEX 


655 


Discontent,  remedies  for,  459 
Discovery  of  America,  18 
Distilling;  in  New  England,  71 
Dividends  out  of  capital.  404 
Dollar,  103,  310.  352;  Silver,  480, 

482,  483;  value,  193 
Domestic  commerce  286,  356 
Domestic  problems,  247 
Drake,  E.  L.,  342 
Drake.  Sir   Francis,  25,  26 
"Drawbacks,"  colonial,  86,  123 
Drawing-frame   196 
Dred  Scott  decision,  375 
Drew,  Daniel,  402 
Duane,  W.  J.,  310 
Duluth,   loading  ore    (ill.),   568; 

unloading  coal    (ill.),  567 
Duquesne,  Fort,  113,  153 
Duryea,  Charles.  431 
Dutch  bankers,  173 
Dutch  colonies,  73 
Dutch  East  India  Co.,  27 
Dutch  Shipping,  76 
Dutfch  traders.  72 
Dutch  West  India  Co.,  42 
Dyestuffs,   598 

East,  18,  10;  manufactures,  293; 
textile  industries,  293,  294; 
trade  with  South  and  West, 
298 

East  India  Co.,  130 

East  Indies.  18 

Economic    development,    17 

Economic   fallacies,   617 

Economic  ills,  suggested  reme- 
dies, 459 

Economic  sections,  three,  286 

Economy  in  World  War,  606 

Edison,  "T.  A.,  427,  431;  portrait, 
429 

Electric  furnace,  430 

Electric  motors,  machines  equip- 
ped  with    (ill.),  551 

Electric  motors  and  cars,  429, 
547 ;    Electric   power,  428,   547 

Electric  telegraiili.   349 

Electric  traction,  564,  566 

Electric  welding,   430 

Electrical  equipment.  546-547 

Electricity,  11;  application  to 
industry,     427;     Economy     in 


railroads,  565;  new  uses,  547, 
548 

Elk  ins   Law.  522 

Ellsworth,  Annie,  349 

Emancipation  proclamation,  384 

Embargo  Act,  217,  226 

Emigrants  crossing  the  plains 
(ill.),  328 

Emigration,  Western,  1.52,  170 

Empress  of  China  (ship),  181 

England,  colonial  fairness,  86, 
88;  colonial  policy,  31,  75; 
colonial  policy,  influence  and 
effect,  88;  colonial  policy,  new, 
by,  1763,  117,  120;  colonial 
relations  from  1660  to  1763, 
115;  colonial  troops,  121,  128- 
129;  conditions  favoring  coloni- 
zation, 33;  contest  with 
France  for  America,  29;  credits 
to  America  before  1837,  315; 
early  American  possessions,  25 ; 
mariners,  26;  shipping  and 
colonial  policy,  76;  trade  with 
colonies,  103;  trade  with,  after 
the  Revolution,  165;  see  also 
Britain 

English  Channel,  213 

Eiig-lish  goods  in  America,  241 

English  money,   193 

English  shipping,  75;  laws  of 
1651  and   1660,  79 

Enterprise    (steamboat),  284 

"Enumerated"  articles,  80,  83 

Erie  Canal,  2.38,  267.  271,  291, 
572;  commerce  in  1840-60,  358; 
completion  (ill.),  270;  rail 
competition,  433 

Erie  Railroad,  344,  394,  396,  401, 
402 

Espionage  Act,  603 

Essex  (ship) ,  214 

Europe,  economic  policy  of  17th 
and  18th  centuries,  75;  peace  in 
1802,  212 

Europe,  Southern,  trade  with,  168 

European  War,  590 ;  effect  on 
commerce,  591;  effect  on  in- 
dustry, 597 ;  see  also  World 
War  ' 

Eveners,  465 

Exchange,  colonial,  106 


656 


INDEX 


Exploration,  Portuguese,  20 ; 
Spanish,  23;  Western,  225 

Export  trade  combinations,  537 

Exports,  after  the  Revolution, 
165;  after  1789,  203;  colonial, 
101,  103;  in  1897-1914,  576;  in 
1916,  592;  in  1919,  614;  manu- 
factures, 549 ;  Napoleonic  Wars 
and,  206 ;  see  also  Commerce ; 
Foreign  trade 

Exports   Council,  603 

Express  business,  348 

Extravagance,  314,  408,  615,  616 

Factories,  lighting,  296 
Factory  system,  195,  197,  296 
Fallacies,  617 
Faneuil,  Peter,   105 
Fanning-mill,  222 
Far  East,  trade  with,  181 
Far  West,  internal  trade  with  in 
1840-60;  land  grants  as  aid  to 
development,  387 
Farm  Land  Banks,  587 
Farm  Loan  Board,  587 
Farm  machinery,   329,   332;    im- 
provements, 390,  417,  553 
Farm  mortgages,  445 
Farm  tools,  early,  61   (ill.),  62 
Farm  work.  551 
Farmers,     distress     after      1819, 

252 ;   organizations,  408 
Farming,  western,  289;   see  also 

Agriculture 
Farms,  colonial,  48 
Federal  courts,  189 
Federal  Farm  Land  Bank  System, 

587 
Federal  government,  187 
Federal  Reserve  Act,  534,  584 
Federal   Reserve   Board,   585 
Federal     Reserve    Districts,    584 

(map) ,  585 
Federal  Reserve  System,  583 
Federal   Trade   Commission,  534, 

535;  efficacy,  540 
Federal      troops,      at      Chicago, 
Pullman  strike  in  1894,  455;  in 
strikes,  448 
Federation  of  labor,  451 
Fessenden.  W.  P.,  381 
Field,  C.  W.,  349;  portrait,  351 


"Fifty-four,  forty  or  fight,"  326 
Financial    crisis,    578;    See   also 

Panics 
Fink,  Albert,  465 
Fire  in  New  York  Citv  in  1835, 

315 
First  Colonial  Congress,  132 
Fish,   14 ;   discovery  in  America, 
24;     New     England,     66;     re- 
sources, 561 
Fishing    industry,    colonial,    94 
destruction  by  Revolution,  147 
privileges  at   1783  peace,   162 
recovery,  182,  222 
Fisk,  James,  402-403 
Fitch,  John,   183;   second   steam- 
boat   (ill.),   182;   third  steam- 
boat  (ill.),  183 
Flagler,  H.  M.,  466 
Flat  boats,  203,  223,  224    (ill.), 

243,  288 ;  stores  on,  245 
Florida,    24,    31;    boundary    con- 
troversy, 160,   161 
Flour,  eastward  traffic  in  1840-60, 
358;   exports,   150,   222;   roller 
process,  417 
Flying  Cloud   (ship),  368 
Food  and  foodstuffs;   early  New 
England  production,   64;   Eng- 
lish  policy   as   to  import,   81; 
export    in    1870-90,   435;    prod- 
ucts, 339 ;  Pure  Food  Law,  524 ; 
unwholesome,     514;      Virginia 
colony   and,    55;    World    War, 
592,  597 
Forbes,  Gen.  John,   113 
Foreign  capital,  300 
Foreign  credit,  315 
Foreign  investors,  485,  490,  593 
Foreign  relations,  247 
Foreign  trade,  before   1807,  222; 
currency  and,  in  1878-90.  484; 
in    1789-92,    203;    in    1820    to 
1830,  299;    in   1831   and  after, 
299;  in   1840-60.  305;   in   1870- 
90,    435;     in     1897-1914,    576; 
manufactures,     549 ;     see    also 
Commerce ;    Exports ;    Imports 
Foreigners,  early  immigration,  91 
Forest  reserves,  556 
Forest  Service,  559 
Forestry,  Division  of,  557 


INDEX 


657 


Forests,    12,    558;    colonial,    96; 

destruction,  555,  556 
Fort  Duquesne,  113,  153 
Fort  Stanwix,  153,  201 
Forty-niners,  329 
Foster,  Charles,  491 
Fourier,  Charles,  340 
France,    attitu/le    aifjer    Revolu- 
tion,     166,      167;      claims     in 
America,     24 ;      contest     with 
England  for  America,  29 ;  New 
England     fisheries     and,     95; 
public  opinion  against  in  Na- 
poleonic     Wars.      205 ;      trade 
with,  165;   trouble  with,   1798- 
1800,  210 
Franklin  Benjamin,  finance,  142; 
on     extravagance,     150;      por- 
trait, 151;  postal  service,  114 
Franklin,  state  of,  171 
Free  passes,  509 
Free  ships  and  free  goods,  207 
Freedmen,  398 
Freedom.    16,   185,   221;    English 

colonial    policy.   31 
Freight   rates.  472 ;   competition, 

446;  in  1869,  407 
Freight   service,   394 
Freight  traffic,  570 
French  and  Indian  War,  95,  116 
French  merchant  marine,  207 
Friedland,  213 

Frontiersmen,    hardships,     156 
Fulton,    Robert,    227;     portrait, 

227 
Fur  trade,  25,  72,  97,  152;  New 
England,  65 

Gadsden   Purchase.   326 

Gage.  General.  132.  135 

Galena.    111.    292.    341.    346.    361 

Gallatin.  Albert,  report  on  manu- 
facturing, 230:  report  on 
transportation.  226,  238,  267; 
U.  S.  Bank,  231 

Gama.  Vasco  da.  20 

Gary.  E.  H..  619.  620 

Gas!  illuminating,  296 

Gasoline  tractor.  606 

Gaspee    (ship).   130 

Genet,  "Citizen,"  205 

Genoa,  18,  20 


George  III,  135;   colonial  policy, 
117,    120;     control    of    Parlia- 
ment, 129;  objection  to  settle- 
ment of  West,   152;   statue   in 
New  York,  127 
George,  Henry,  460 
Georgia,  31,  45,  132,  1S4,  166 
Germany.  590 

Gilbert,  Sir  Humphrey,  26,  29 
Glass  as  an  early  New  England 

industry,  71 
Goethals,  G.  W.,  574 
Gold,  9,  23;  balance  of  trade  and 
imports  and  exports  in  1878-98, 
486;  California  discovery,  329; 
cornering  the  market  in   1869, 
403;     increased    supply,    341; 
movements     in     World     War, 
593;    production,    549 
Gold  coin,  194,  310,  311,  351 
Gold  exchange,  382 
Gold  reserve,  491,  495,  496 
Gold    standard,    480,    491,    497; 

Cleveland  and,  492,  494 
Golden  Age  of  American  history, 

324 
Good  Roads  Movement,  568 
Goodyear,   Charles,   339 
Goodyear  welt,  425 
Gorgas,  W.  C,  574 
Gorges,  Sir  Ferdinando,  42 
Gould,  Jay,  401,  402 
Gould    system   of   railroads,   493, 

505;  strikes  in  1885-86,  450 
Government,  better  system  needed 
1787,  177;  bonds, 'l91;  depart- 
ments, early,  187;   lack  of  ad- 
equate   system    at    Revolution, 
140;   Washington  to  Lafayette 
in   1789,   185 
Government    ownership    of    rail- 
roads, 010 
Government    regulation    of    busi- 
ness, 415,  469,  518,  529 
Governors'  Conference,  557.  558 
Grain,  252,  332;    crop  failure  of 
1835.  314;   Eastward  transpor- 
tation. 291,  358;  exports.  222; 
low  prices,   253;   Virginia   col- 
ony and,  56,  61 
Grain  elevators.  418;  at  Buffalo 
(ills.),  571,  572 


658 


INDEX 


Granger  Movetnent,  408 

Grant,  U.  S.,  403;  veto  of  infla- 
tion bill,  477 

Grass,  12,  13 

Great  Britain.     See  Britain 

Great  Falls,  Mont.,  12 

Great  Lakes,  11,  13,  14,  25,  159, 
272,  291;  cities,  growth,  359; 
commerce  in  1840-60,  358; 
steamboats,  285 ;  transporta- 
tion, 433-434,  569 

Great  Northern  R.  R.,  505.  506 

Great  Western    (ship),  302 

Greenbacks,  379,  492 ;  problem  of 
redemption,  475 

Gregg,  Andrew,  216 

Grenville,  George,  120,  121-122, 
126 

Griffiths,  J.  W.,  367 

Guadaloupe  Hidalgo,  326 

Gunpowder,  464 

Hamilton,  Alexander,  176;  fund- 
ing scheme,  191 

Hancock,  John,  128 

Hand  looms",  99,  100,   (ill.) 

Harbors,  10 

Hard  money,  307 

Hard  times.     See  Depression 

Hargreaves,  James,   196 

Harkness,   S.   V.,  406 

Harnden,  W.  S.,  348 

Harriman,   E.  H.,  505,  511 

Harrisburg,  Pa.,  344,  397 

Harrisburg  Convention,  256 

Harrison,  Benjamin,  491 

Harrod's  Town,   156 

Harrows,  early,  62 

Hartford,  Conn.,  29 

Harvesting  machinery,  329,  417 

Hat-making  industry,  colonial 
restrictions,  84-85.  89 

Hawkins,  Sir  John,  25,  26 

Hay-Pauncefote  treaty,  575 

Hayes,  R.  B.,  448 

Haymarket  Square  riot,  Chicago, 
453 

Havti,  23 

"Head  right,"  47,  48,  49 

Heligoland,  220 

Hemp  growers,  255 

Henderson,  Richard,  154,  155,  156 

Henry,  Patrick,  108,  132,  158 


Hepburn  Act,  523 

High  finance,  511 

Highways.     See   Roads 

Hill.  J.  J.,  508 

Hog  Island,  shipbuilding  (ills.), 
605,  606 

Hogs,  223,  244,  332;  Virginia 
colony,  62 

Holding  company,  468,  502 

Holliday,  Ben,  364 

Home  industries,  251 

Home  market,  253 

Homespun,  99 

Homestead,  Pa.,  strike  in  1892, 
454 

Homestead  Law.  387 

Hoover,  H.  C,  603 

Howe,   Elias,   330;    portrait,   336 

Hudson,  Henry,   27 

Hudson  River,  227;  steamboats, 
283;  tunnel,  564.  565 

Hudson  River  R.  R.,  345 

Hudson  valley,  72;  settlement,  47 

Hughes,  C.  E.,  insurance  investi- 
gation, 509,  511 

Huguenots.  24 

Human   life,   561 

Hussey,  Obed,   330 

Illinois,  243;  canals,  275 
Illumination,  296;   electric,  427 
Immigration,     327;     after     Civil 
War,    390;    between    1820    and 
1837,    202;    contract    laborers, 
458;    early,    90;    high    tide    in 
1907,  542-'  tests.  542 
Imports,    after    the    Revolution, 
105;  after  1812,  241;  excessive 
after     Civil     War,     408;     first 
tariff  on,  189,  190;  in  1916  and 
1917,   592;    Revolutionary  era, 
149;  Virgin-ia  colony,  63 
Impressment  of  seamen,  208,  216 
Incandescent  Electric  lamp.  427 
Income  tax,  496,  535;  Civil  War, 

381 
Indented  Servants,  49 
Independence,     British    acknowl- 
edgment,   160;    disadvantages, 
166 
Independence  Hall   (ill.),  177 
Indiana,  243;   canals,  275 
Indians,  American,   depredations 


INDEX 


659 


in  Revolutionary  era,  157;  emi- 
gration to  the  West  and,   153; 
New  England,  64;   rights,  22; 
Virginia,  57,  59 
Indigo,  85,  103,  147 
Industrial  combination.    See  com- 
bination 
Industrial    Commission,   518 
Industrial   expansion,    1840-1860, 

323 
Industrial  Relations  Commission, 

531,  588,  621 
Industrial  revolution,   195 
Industrial  warfare,  455 
I.  W.  W.,  516 

Industry,   colonial,   55 ;    colonial, 
encouragements,    85;     colonial, 
general  character,  91;  colonial, 
restrictions,  84,  88;  early  New 
England,  64;  European  War  in 
1914,  effect,  597;  readjustments 
after   World   War,    617;    sym- 
metrical   growth    in     1840-60, 
324 
Inflation,  608,  617 
Inflation  bill  of  1874,  477 
Inflationists,  476,  482 
Injunction,      457;      "government 

by,"  458 
Inland    Waterways    Commission, 

557 
Insiders,  510 
Insurance      companies,      corrupt 

practices,  509,  511 
Intercolonial    trade,   82.    86,    139 
Interlocking     directorates,      503, 

537 
Internal  improvements.  226,  238 ; 

Federal  government  and,  263 
Internal  trade,  286,  357 
Internal  revenue  service,  191 
International  Harvester  Co.,  503, 

508.  513 
Interstate    Commerce    Act,    470, 

471 

Interstate  Commerce  Commission. 

471,    610:    authority    an.    523; 

powers.  529 ;  water  routes,  573 

Inventions.  222.  .325,  431;  World 

War  lack.  605 
Inventors.    15,    195,    199 
Ipswich.  'Mass..  70 
Iron,    8,    97,    434,    543;    colonial 


export,  101 ;  colonial  products, 
100;  colonial  restrictions,  85, 
89;  furnaces,  early,  in  New 
England,  71 ;  manufacture,  230, 
294;  ore  dejiosits  (map),  9; 
period  from   1840  to  1860,  337 

Iroquois  Indians,  153,  154,  157 

Irrigation,  8 

Irrigation   projects,  559 

Irving,  Washington,  quoted  on 
comforts  of  colonial  farm  life, 
98 

Isthmian  Canal  Commission,  574 

Italian  cities,  18,  19,  22 

Jackson,  Andrew,  256,  259,  264, 
265;  portrait,  308;  Specie 
Circular  in  1836,  315;  U.  S. 
Bank  and,  306 

Jamaica,  182 

James,  Duke  of  York,  43 

James  I,  King.  27,  31,  37,  39;  on 
tobacco,  60.  79 

Jamestown,  Va.,  38;  in  1622 
(ill.),  56;   slavery,  50 

Janny  coupler,  393 

Japanese  immigrants,  542 

Jay,  John,  132,  142,  208;  por- 
trait, 209 

Jay  Treaty,  208 

Jefferson.  Thomas,  216.  217,  218; 
Louisiana  purchase,  225;  plow, 
222 

Jena,  213 

Joliet,  111.,  coke  ovens   (ill.),  560 

Kansas,  328;  Court  of  Industrial 

Relations,  623 
Kansas-Nebraska  bill,  373 
Kaskaskia,  158 
Keel-boats.  224 
Kelly.  William,  ,3.38 
Kennebec  River.  40 
Kentucky,     170.     171,     184;     aa 

county  of   Virsinia.    159,    160; 

defense.  158;  first  census.  202; 

population,     223;      settlement, 

154 
Kentucky  River.  155.  158 
Keokuk."  Li.,  dam,   11,   12,    (ill.) 
Kerosene.   308 

Kevstone  Watch  Case  Co.,  508 
Kidd.  Captain,  105 


660 


INDEX 


Knickerbocker  Trust  Co.,  582 
Knight,  E.  C,  case,  473,  525 
Knight,  Sarah  Kemble,  113 
Knights  of  Labor,   406,  450 
Knox,  William,  167 
Ku  Klux  Klan,  399 

Labor,  colonies,  48;  discontent 
and  cure-alls,  459;  disturbances 
and  wage  reductions  in  1873- 
96,  447;  disturbances  in  1886, 
452 ;  legislation,  457 ;  migra- 
tion to  city.  551,  552;  not  a 
commodity,  536;  organization, 
449,  450,  623;  problems  after 
World  War,  618;  railroads, 
612;  Southern  States  and  the 
Slaves,  376 

Labor  agitators,  453,  457 

Labor  and  capital,  456,  457,  622; 
growth  of  animosity,  514,  531 

Labor  movement,  340;  beginning, 
296;  combinations  and,  514; 
progress  after  Civil   War,  404 

Labor-saving  machinery,  416,  421 

Laborers,  foreign,  458 

Lakes,  10 

Lancaster  turnpike,  200 

Land,  colonial  tenure,  45 ;  govern- 
ment sales,  223 ;  grants  to  rail- 
roads, 386;  public  distribution, 
387 ;  settlers'  method  of  ob- 
taining, 46;  speculation,  243, 
246;    See  also  Public  lands 

Land-banks,  110 

Landis,  Judge  K.  M.,  508 

Lane,  F.  K.,  on  natural  resources, 
6 

La  Salle,  Sieur  de,  25 

Large  scale  production,  415 

Lawrence,  Mass.,  261,  335 

Lead,  9,  148,  292,  341,  361 

Leadership,  15 

League  of  Nations,  624 

Lee,  R.  H  ,  132 

Lee  homestead,  48 

Legal-tender  notes,  475 

Lehigh   River,   269 

Leopard    (ship),  216,  220 

Lesseps,  Ferdinand  de,  573 

Levant  trade,   18,   19,  20,  22 

Lever  Act,  603,  621 

Lewis,  Meriwether,  225 


Liberty.  See  Freedom:  religious 
liberty 

Liberty   (ship),  128 

Light,  artificial,  296;  Electric, 
427 

Lincoln,  Abraham,  243,  373 ;  an- 
cestors, 156;  earlv  life,  289- 
290;  on  the  Civil'  War,  383; 
portrait.  374 

Lincoln,  Thomas,  243 

Linotype,  424    (ill.),  425 

Liquor,  excise  tax,  190;  New 
England  manufacture,  early,  71 

Liquor  legislation,  607 

Lisbon,  20 

Literacy  test  for  immigrants, 
542 

Little  Falls,  201 

Live  Stock,  223,  552;  Virginia 
colony,  62 

Loco-Ix)co  party,  298 

Locomotives,  279;  electric,  565 

Log  cabins,  157 

London  Company,  37,  38,  39,  47, 
63 

Looms,  hand,  99,  100  (ill.); 
hand  and  power,  229;  power, 
197 

Lottery,  government,  143 

Louislwurg,  29,  95 

Louisiana,  287;  purchase,  224; 
territory,  24,  30 

Louisville,  158,  244,  201;  incor- 
poration,  156 

Louisville  and  Portland  Canal, 
267 

Lowell,  Mass.,  261,  293,  335 

Lowell,  F.  C.  229;   portrait,  229 

Lowndos,  William,  219,  235 

Lubrication,  341 

Lumber,  291,  4.35,  549 

Luxury,   Revolutionary,    150 

Lynn,   Mass.,   71 

McCormick,  C.  H.,  330;  portrait, 

330 
McCormick  Reaper  Works,  453 
McCulIoch,  Hugh,  475 
Machinery,   15,  195,   197 
McKinlev,  William,  497,  501,  581 
McKinley  Tariff,  426,  491 
McLane,  Louis,  310 
Macon  Bill  No.  2,  218 


INDEX 


661 


Madison,  James,  176,  218;  policy 
of  internal  improvements,  238; 
on  tariff  of  181C,  234 

Magellan,  Ferdinand,  21 

Mail,  carrying  to  Far  West,  364 

Maine,  42 

Maize.     See  Corn 

Malefactors  of  great  wealth,  527 

Manchester,  N.   H.,  335 

Manhattan  Island,  27;  in  1702 
(ill.),  4;  in  1921    (ill.),  5 

Mann-Elkins  Act,  529 

Manufacture,  after  War  of  1812, 
242;  American  versus  foreign, 
427;  capital  invested,  statis- 
tics, 543;  colonial  progress, 
99;  East,  expansion,  293;  ex- 
pansion after  Revolution,  183; 
foreign  markets  for,  548;  im- 
portance in  1897-1914,  541;  in 
World  War,  598;  large  scale 
production,  422;  New  England, 
early,  70;  period  of  1840-60, 
333;  prosperity  after  Civil 
War,  395;  protection  and,  260; 
Revolution  as  stimulus,  148; 
rise,  228 

Marietta,    184 

Martinsburgh,   W-.   Va.,   448 

Marx,  Karl,  459 

Maryland,  43,  72,  159;  naviga- 
tion of  Potomac,  176 

Mason,  John,  42 

Massachusetts,  hanking,  352 ; 
debtors'  property.  169;  cotton 
mills,  293;  defiance  of  England, 
132;  founding,  41;  manu- 
factures, early,  70;  paper 
money,  109;  Parliamentary 
coercion,  131;  roads,  earliest, 
111-112;  Western  lands,  1.59 

Massachusetts  Bay  Company,  41, 
66 

Mather,  Richard,   on   whales.   96 

Mauch  Chunk,  Pa.,  276  (ill.), 
277 

M(iy flower  (ship),  64 

Meat,   tainted,   514 

Meat  packing  industry.  419.  423, 
503,  524 ;  control  623,  foul  con- 
ditions, 514 

Melting  pot,  15 


Mercantile  sj'stem,  75;  colonies 
and,  77 

Merchant  marine,  204,  211,  298, 
.324,  307,  576,  594;  in  Civil 
War,  378;  in  1870-90,  436;  in 
twentieth  century,  439;  un- 
doing, 368 

Merchant  Marine  Act,  613 

Mergenthaler  linotype,  425 

Mergers,  503 

Merrimac  River,  293,  335 

Mexican   War,   326 

Mexico,  disco»very,  23 

Miami  Canal,  274,  275 

Miami  Company,  184 

Middle  Passage,  105-106 

Middle  West,  327' 

Milan  Decree,  215,  217,  218,  219 

Military  forces,  return  to  Civil 
life,  609 

Militia,   early,    140 

Milwaukee,  272 

Minerals,  8 

Mining,  340,  549;  in  W^orld  War, 
598;  increase  after  Civil  War, 
397 ;   large  scale,  434 

Minneapolis,  418 

Minnesota,  328 

Mint,   194 

Miquelon,  30 

Mississippi  River,  11,  91,  162; 
closing  in  1802,  224;  opening, 
202,  223;  Spain  and,  170,  171, 
185,  201;  Steamboats  on,  228; 
steamboats  and  flatboats,  242; 
steamboat  development,  284 ; 
steamboats  in  1860,  361  (ill), 
363;  traffic  252,  288,  361; 
traffic  shrinkage  in  competi- 
tion with  railroads,  433 

Mississippi  valley,  7,  29,  30; 
railroads  in  the  south.  347 

Missouri    Compromise,    251,    373 

Missouri    River,   346 

Mobile,  366 

Mohawk    Valley,    201 

Moisture,  7 

Molasses.  103.  126;  colonial  im- 
port duty.   122 

Molasses  Act  of  1733,  86,  121. 
122 

Monetary  system,  bimetallic,  480 


662 


INDEX 


Money,  abundance  after  1778, 
150;  cheap,  460,  480;  colonial, 
106;  colonial  paper,  109; 
paper,  169,  232,  306,  460,  461, 
476;  paper.  Civil  War,  379; 
paper,  Revolutionary  era,  141 ; 
sliortage,  476;  United  States 
and  English,   193 

Monopolies,  415,  461,  469,  471, 
507,  513;  control,  623 

Monroe,  James,  216;  Election  of 
1820,  247;  on  internal  im- 
provements, 263;  Monroe  Doc- 
trine, 251 

Montreal,  24 

Moratoria,  591 

Morgan,  J.  P.,"  504,  505 

Mormons,   328 

Morrill  Act,  384 

Morris,  Robert,  143,  192 

Morris  and  Essex  Canal,  269 

Morris  County,  N.  J..  100 

Morse,  S.  F.  B.,  349;  portrait, 
350 

Motor  cars,  431 ;  first  Fierce- 
Arrow    (ill.),  430 

Motor  trucks,  547,   (ill.),  606 

Mt.  Pisgal,  Pa.   (ill.),  276 

Mowers,  329 

Mule-spinner,  196 

Munitions,  592 

Muskingum  Valley,  184 

Mystic,  Conn.,  67 

Xails,  colonial  manufacture,  100- 
101  ;  wire,  425 

Namquit  Point,  130 

Xantucket,   96 

Napoleon,  211;  continental  sys- 
tem and  its  failure,  210; 
"Decrees"  against  England, 
214,  215;  England  and,  213; 
insult  to  America,  218,  219; 
Louisiana  and,  225;  revocation 
of  Decrees,  218,  219;  Russia 
and,  213,  215,  220 

Napoleonic  Wars,  605;  Ameri- 
can neutrality,  205;  effect  on 
American  commerce,  204,  206; 
renewal  in   1803,  212 

National   banking  system,  385 

National  banks,  386 


National  Cash  Register  Co.,  508 

National  Conservation  Commis- 
sion, 558,  501 

National  Cordage  Co.,  493 

National  Greenback  party,  478 

National    Industrial    Board,    622 

National  Industrial  Conference, 
621 

National  Labor  Union  Conven- 
tion in  1866,  406 

National  Monetary  Commission, 
and  its   report,  583 

National  Pike,   264 

National    Republican    party,   308 

Nationalism,  251 

Nationality,  European  feeling, 
75 

Natural  gas,  434,  555,  556 

National  resources,  558 ;  de- 
struction, 554;  extent  (Lane 
quoted),  6;  Smith,  J.  R.,  on,  14 

Naival  stores,  97;  colonial  coun- 
ties, 85 

Navigation  Act  of    1651,   76 

Navigation  Act  of  1817,  239, 
240 

Navigation  laws,  121;  European 
system,  241 

Navy,  234;  Revolutionary  era, 
149 

Negroes,  16;  after  the  Civil 
War,  398;  migration  to  North 
in  World  War,  599 ;  proportion 
in  colonies,  91;  source,  103; 
See  also  Slavery 

Nethcrland,  claims  in  America, 
27;    treaty  with,    173 

Neutrality  in  Napoleonic  Wars, 
205 

Neutrals,  rights  in  war,  205,  217, 
221,  599,  600 

Nevada,  481 

New  England,  8,  13;  banks,  352; 
colonial  agriculture,  92;  com- 
merce, early,  68;  cotton  mills, 
293,  335;  Council  for,  40  41; 
distilleries.  101;  earlv  indus- 
try, 64;  finance  in  1814.  232; 
fisheries,  66;  fisheries  in  colo- 
nial period,  94;  iron  indus- 
tries, early.  100;  land  tenure, 
46;  maniifactiires,  early.  70; 
restraint  of  trade  and  fishing, 


INDEX 


663 


134-135;      ship-building,      67; 
tariff  of  1824,  255 

New  Hampshire,  180;  origin,  42; 
unrest,  170 

New  Harmony,   Ind.,  297 

New  Jersey,  43,  174,  468;  land 
and  settlers,  47 

New  Netherlands,  31,  42,  43,  72; 
land  tenure,  47 

New  Orleans,  170,  171,  185,  203, 
223,  225,  287,  288,  202,  347; 
as  cotton  port  in  1840-60,  362; 
in  1860  (ill.),  362;  loss  of 
Ohio  Valley  trade,  360,  361; 
slave  auction  (ill-),  334; 
steamboats,  284 

New  Sweden,  colony,  27-28,  42, 
72 

New  World,  discovery,  21 

New  York  (city),  as  seaport, 
211-212;  colonial  postal  ser- 
vice, 113;  congress  of  1765  to 
protest  Stamp  Act,  124,  125: 
electric  transportation,  566; 
expansion,  291,  292;  subways 
and  tunnels,  564,  560;  trade, 
298;  See  also  Manhattan 
Island 

New  York  (state),  banking  sys- 
tem, 352 ;  barge  and  locks  on 
canal  systemi  (ills.),  570; 
canals,  273;  Constitution  and, 
180;  Erie  Canal  and,  271; 
western,  238;  Western  claims, 
159 

New  York  Barge  Canal,  570 
(ill.),  571 

New  York  Bay,  27 

New  York  Central  R.  R.,  278, 
345,  394,  401,  504,  505 

New  York,  New  Haven  and  Hart- 
ford R.  R.,  504,  .'509.  511.  532; 
Electrification    (ill.),   564 

Newark,  N.  J.,  261 

Newbold,  Charles,  222 

Newfoundland,  24,  26,  29;  fish- 
ing grounds,  95 

Newport,  R.  I.,  run,  101 

Niagara  Falls,  11 

Nicaragua  Canal  Boand  and  Com- 
mission, 573,   574 


Non-importation,     126-127,    133; 

in   1806,  216;  New  York,  129; 

second  movement,   128 
Non-Intercourse  Act  of  1809,  218 
North,  versus  South  in  1860,  375 
North,  Lord,  129,  134 
North     America,     English     and 

Spanish     possession     in      1763 

(map),    30;    French,    English, 

and    Spanish    claims    in    1713 

(map),  28 
North   Carolina,    180;    claims   to 

Tennessee,  159;  early  industry, 

91 
North   Central    States,  327,  332; 

connection  with  the  East,  360; 

railroads,  345 
Northern  Pacific  R.  R.,  409,  505, 

506 
Northern  Securities  Co.,  506,  526 
Northwest  Territory,  184,  223 
Nova  Scotia,  29,  94,  95,  149 
Nullification,  South  Carolina,  259 

Ocean  freight  rates,  594 

Ocean  shipping,  300 

Ocean  steam  navigation,  368 

Ogden,  Utah,  391-392 

Oglethorpe,  James,  45 

Ohio,  243;    admission,  223,  226; 

canals,  274,  275 
Ohio  Company,  184 
Ohio  country,  184 
Ohio    Life   Insurance   and   Trust 

Co.,  353 
Ohio   River,    154,    156,    158,    184, 

226,  227,  244 
Ohio  valley,    113,   158,  238,  252, 

360 
Oil.     See  Petroleum 
Oil  Creek  region,  343 
Old  Ironsides  (locomotive),  282 
One  big  union,  516 
Open-hearth      process      of      steel 

making,  42.?,  544   (with  ill.) 
Open  shop,  620.  622 
Orange  grove   (ill.),  552 
Oranges,  packing    (ill.),  553 
Orders    in    Council,    as    to    com- 
merce     with      Britain,      167; 

Napoleon  and.  214 
Ordinance  of  1787,  184,  223 


664 


INDEX 


Ore,      loading      and      unloading 

(ills.),  5G8,  569 
Oregon,  329 
Oregon  Territory,  325 
Orient,  trade  with,  181 
Otto,  N.  A.,  431 
Overcapitalization,   511,   520 
Over  expansion,  245,  304 
Overhead  charges,  445 
Owen,  Robert,  297 
Oysters,  94 

Pacific   (ship),  370 

Pacific  coast,  7,  11 

Pack-horses,  156    (ill.) 

Packet  lines,  300 

Panflico  Sound,  26 

Panama    (state),  574 

Panama,  Isthmus  of.  369,  371 

Panama  Canal,  573;  influence, 
575;  tolls  controversy,  575 

Panic  of  1819,  245,  251 

Panic  of  18.37,  304 

Panic  of   1857,  3.53 

Panic  of  1873,  409,  476 

Panic  of  1893.  474 

Panic  of  1907,  581 

Panics,  587 ;   cause,  578 

Paper  money,  169,  232,  306,  460, 
461;  Civil  War,  379;  colonial, 
109;  Kevolutionary  era,  141; 
value,  476 

Parliament,  116,  117-118,  126; 
coercion  of  Massachusetts,  131; 
George  III  in  control,  129 

Parson's  Case,  108 

Pasture,  13 

Patent  law,  195 

Patents,  395 

Paternalism,  515 

Paterson,  N.  J.,  261,  335,  618 

Patroons,  47 

Paulus  Hook,  113 

Pawtucket,  R.  I.,  197 

Payne,  O.  H.,  466 

Payne-Aldrich  Act,  529 

Peace  Conference,  624 

Peace  of  1783,  160;  trade  after, 
164;  United  States  (map),  161 

Pearl  Street,  New  York,  94 

Penn,  William,  43,  46,  48;  por- 
trait, 44 

Pennsylvania,     Germans    and 


Welsh,     91;     oil,     341;     paper 
money,   110;   public  works  and 
canal  system,  273;  roads,  113; 
settlement,  44 
Pennsylvania     Journal,     suspen- 
sion, 124 
Pennsylvania  Railroad,  344,  .348, 
361,  .394,  401,  .504;  steel  rails, 
397;    strike   in    1877   at   Pitts- 
burgh,    448 ;     train     emerging 
from     Hudson      River     tunnel 
(ill.),  565 
Pennsylvania   Steel  Co.,  397 

Pension  laws,  426 
Peonage  in  the  South,  421 

People  of  tlie  United  States.  See 
Americans 

Pepperell,  William,  95 

Perseverance,    15 

Peru,  discovery,  23 

Peter,  Hugh,  66 

Petroleum,  10,  341,  434.  550,  555, 
556,  560;  in  1870,  398; 
Standard  Oil  Co.,  465 

Philadelphia,  44,  273;  colonial 
postal  service,  114;  congress  of 
Sept.  5,  1774,  1.32;  Constitu- 
tional convention,  177-178; 
continental  congress  of  1775, 
L35;  Independence  Hall  (ill.), 
177 

Philadelphia  and  Trading  Co., 
494 

Piedmont  region,  8  ' 

Pierce- Arrow  car    (ill.),  430 

Pike,  Z.  M.,  225 

Pilgrims,  40,  64 

Pinchot,  Gifford,  557,  559 

Pine  lumber,  435 

Pinkerton  detectives,  454 

Pinkney,  William,  216 

Pipe  lines,  466 

Piracy.  104,  168,  183 

Pitt,  ^Villiam,  120  127;  defense 
of  colonies,  134 

Pittsburgh,  224,  244.  245,  252, 
261;  strike  in  1877,  448; 
settlement,  153 

Pizarro,  Francisco,  23 

Plains.    13 

Plant  life,   12 

Plantations,  48,  63 

Platform,  political,  first,  308 


INDEX 


665 


Plows,  62,  222 

Plymouth,  Mass.,  40;  early  suf- 
ferings and  industries,  64 

Plymouth  Company,  37,  40 

Police  strike,  Gift 

Political  corruption,  509 

Pony  Express,  364 

Pools,  462;  railroads,  464,  471, 
472,  610;  various  industries, 
404 

Population,  colonies,  growth  from 
1660  to  1763,  90;  increase  from 
1830  to  1860,  326 

Populist  party,  460 

Pork  packing,  244,  292 

Ports  of  entry,  190 

Portsmouth,  N.  H.,  70 

Portugal.  possession  of  dis- 
covered lands,  22 

Portuguese  navigators,  20 

Post-riders,  113 

Postal  service,  colonial,  113.   114 

Potomac  River,  42,  48,  172,  191; 
navigation,    176 

Poverty,  460 

Power,  electric,  428,  547 

Prairies,  13 

Presidency  in   1824,  247 

Price  agreements,  462 

Prices,  collusion  to  maintain, 
after  World  War.  615;  com- 
binations and.  512;  control, 
461 ;  decline  after  Civil  War, 
404;  decline  from  1873  to  1897, 
441;  government  regulation  in 
case  of  railroads.  611;  influence 
of  changes.  442  ;  Revolutionary, 
143;  trend  1890-1020  (diagr.'), 
614;  wages  and,  443;  wages 
and,  1840-90,  404 ;  World  War, 
598,  607;  World  War  and 
after.  613;  World  War  move- 
ment (diagr.).  616 

Printing  industry.  424,  425 

Privateering.   104.   147.   149 

Production,  expansion,  286;  large 
scale,  415 

Progressive  party,   533 

Prohibition.  607 

Promontory  Point.  391.  393 

Promotion  asrencies,  510 

Propellers,  359 


Proprietary  colonies,  42 

Prosperity  before  the  Revolution, 
146;  compared  with  other  na- 
tions, 3;  in  1789.  183;  post- 
Revolutionary  expectation  and 
failure,  162,  164;  under  the 
constitution,  195 

Protection,  189,  234,  251;  as 
policy  after  Civil  War,  384; 
effects  of  policy,  280;  European 
policy,  75;  high-water  mark, 
257,  501 ;  See  also  Tariff 

Provincetown,  96 

Provincial  congresses,   134 

Prussia,  treaty  with,  173 

Prussian  autocracy,  599 

Public  lands,  252;  spfeculation, 
312;  States  and,  266 

Public  Lands  Commission,  557 

Public  utilities,  533 

Public  works,  269 

Publicity,  520 

Puget  Sound,  11 

Pullman,  G.  M.,  348,  393;  por- 
trait, 392 

Pullman  Palace  Car  Co.,  strike 
in  1894.  454 

Pure  Food  Law,  524 

Puritans,  35,  41 

Quakers.  43.  44 
Quarter-Sections,   387 
Quincy.  Mass.,   276 
Quitrent,  46 

Rail  mills.  339 

Railroad  Boards  of  Labor  Adjust- 
ment, 612 
Railroad  brotherhoods,  406 
Railroad  Labor  Board,  612 
Railroads,  beginning,  275;  capi- 
talization, e  -x  c  e  8  s  i  V  e,  401 ; 
changes  in  service,  393;  com- 
bination movement.  504 ;  com- 
petition in  traffic.  445;  conges- 
tion in  World  War.  596; 
consolidations.  394,  472 ;  con- 
struction and  corporations, 
early,  282;  construction  in 
1870-90.  431 ;  earnings,  decline 
after  1867.  407;  electrification, 
564,  565 ;  equipment  improve- 
ments,   563;     extension    after 


666 


INDEX 


Civil  War,  390;  first  line,  5; 
first  roads,  character,  277 ;  free 
passes,  509;  Gould  system 
strikes  in  1885-86,  450;  govern- 
ment ownership,  610;  incon- 
veniences of  travel  and  trans- 
portation in  1860,  347;  iron 
rails  and  steel,  396;  land 
grants,  386;  map  of  roads  in 
1860,  346;  map  of  roads  in 
1920,  562;  pools,  464;  pools  in 
1920,  610;  rate  problem  after 
1911,  538;  rate  war  in  1869, 
407;  rates,  472;  regulation 
problem,  610;  reports  falsified 
in  1893,  493;  resumption  of 
construction  in  1897-1914,  563; 
revenues  after  1911,  538; 
speculation,  400;  State  rates, 
612;  strikes  in  1877,  447; 
Transportation  Act  of  1920, 
610;  transportation  progress, 
343;  trunk  line  traffic,  1840-60, 
360;  uniform  gauge,  347,  348, 
395 ;  World  War  and,  539 

Rainbow    (ship),  366    (ill.),   367 

Rainfall,  7 

Raleigh,  Sir  Walter,  26;  colo- 
nization failure,  36;  portrait, 
37 

Randolph,  John,  216;  on  the 
tariff  of  1824,  255;  on  the  tariff 
of   1828,  257 

Rates.  See  Railroads  Freight 
rates 

Raynham,  Mass.,  71 

Reading  Company,  515 

Reapers,  329,  417;  reaper  of  1860 
(ill.),  331 

Rebates,  508,  467 

Reciprocity,  302 

Reclamation  Act,  559 

Reconstruction  of  the  South,  398 

Reconstruction  problems  after 
World  War,  608 

Reexport  trade,  211,  214 

Reforestation,  556 

Refrigerator  ears,  419 

Regulation  of  business.  415,  469^ 
518,  529;   States,  532 

Relief  acts,  252 

Religious  liberty,  31,  40,  43 


Republican    party,    375 
Repudiation,     110,    146;     States, 

319 
Reservations,  556 
Resources,  3;  natural,  6;  natural 

(Smith   quoted),    14 
Restraint  of  trade,  463,  532 
Resumption       (of      specie      pay- 
ments), 477,  478 
Revenue,      Congress      and,      174; 
Federal,   189;   tariffs  and,   258 
Revolution,  139;   commerce,  148; 
crisis    after,    164 ;    emigration 
begun,    152;    end  of   war,    160; 
industrial      conditions,      146; 
manufacturing,  148 
Rhode  Island,  174;   colonial  iron 
works,    100,    101;    constitution 
and,   180;  molasses  in  colonial 
trade,   121 ;  settlement,  42 
Rice,    103,    166;    as   money,    106; 
colonial  trade,  80,  88;  exports, 
150 
Richmond,  Va.,  429,  564 
River  and  harbor  improvements, 

265,  571 
Rivers,    10;   colonial  communica- 
tion by.  111 
Roads,     263;      automobiles     and 
better     roads,     568 ;     colonial, 
111;  government  and,  238;  im- 
provement, 567 ;  turnpikes  and 
toll  roads,  199-200,  201 
Roanoke  Island,   36 
Robinson,  Andrew,  98 
Rochambeau,  Count  de,  145 
Rockefeller,  J.   D.,  466 
Rockefeller,  William,  466 
Rocket    (locomotive),   277    (ill.), 

279,  280 
Rockingham,    Marquis    of,     126, 

127 
Rocky  Mountains.  5,  7,  8 
Rogers,  Ezekiel,  70 
Rolfe,  John,  58 
Roller   process    of   flour   making, 

417 
Rome,  N".  Y.,  201 
Roosevelt,  Theodore,  conservation 
movment,   557;    portrait,    521; 
railroads  and,  522;  trusts  and, 
519 
Rowley,  Mass.,  70 


INDEX 


667 


Royal  William  (ship),  302 

Rubber  goods,  339 

Rubber  tires,  546 

Rule  of  1756,  207,  214 

Rum,  103,  105,  148;  colonial  im- 
portation, 122;  New  England, 
71,  101 

Rural  life,  551;  imiprovement, 
553-554 

Russel,  Majors  and  Waddell,  364 

Russia  and  Napoleon,  213,  215, 
220 

Sabotage,  516 

Sailing  vessels,  American,  367 

St.  Augustine,  24 

St.  Croix,  150 

St.  Eustalia,  150,  182 

St.  Lawrence,  Gulf  of,  24 

St.  Lawrence  River,  24 

St.  Louis,  346 

St.  Mary's  River,  571 

St.  Pierre  (island),  30 

St.  Thomas,  W.  I.,  150,  182 

Sa.ary  grab,  402 

Salem,  Mass.,  41,  71 

Salmon,  14 

Salt,  103,  148,  463;  for  New  Eng- 
land fisheries,  82 

Salt  Lake  City,  328,  363,  364 

Salt  River   project,  559 

San  Francisco  Bay,  11 

Sanduskv,  159 

Sandy  Hook,  174 

Sangamon  River,   290 

Santa  Fe  Trail,  363 

Sault  Ste.  Marie,  275,  434 

Savannah,   366 

Savannah  (ship),  301;  model 
(ill.),  301 

"Save  food"  campaign,  607 

Sawmills,  70 

Scabs,  456 

Scalawags,  399 

Schooners,  98 

Schuvlkill  Navigation.  269 

Schuylkill  valley,   100 

Screw  propeller,  359 

Seamen,  94,  104;  American,  high 
wages,  436-437  ;  British  seizure, 
208'^ 

Secession.  373 

Seneca  Chief   (boat),  270 


Seneka  Oil,  342 

Servants,   indented,  49 

Settlers,  methods  of  obtaining 
land,  46;  reasons  for  coming  to 
America,  33 ;  West  and,  152 

Sewing  machine,  336 

Shad,  94 

Shaftsbury,  Earl  of,  43 

Shays,   Daniel,   170 

Sheffield,  Lord  John,  168 

Shellfish,  14 

Sherman,  John,  479 

Sherman  Antitrust  Law,  470-471, 
532,  534;  prosecutions  under, 
525;    Supreme  Court  and,  473 

Sherman  Silver  Purcliase  Act, 
489,  492;   repeal,  494 

Ship  purchase  bill,  595 

Shipbuilding,  222,  301,  436 
American,  367;  colonial,  86 
colonial  progress,  97 ;  expan 
sion  after  Revolution,  183 
Hog  Island  (ills.),  605,  606 
iron  ships,  371;  New  England, 
67;  protection,  190 

Shipping  Act,  1916,  596,  613 

Shipping  Board,  596,  603 

Shipping  industry,  after  the 
Revolution,  167;*  after  War  of 
1812,  239;  American  in  Civil 
War,  377;  American  interests 
in  1807,  217;  discriminating 
duties,  239,  613;  export  trade 
in  1897-1914,  576;  handicap, 
239;  in  1820-30,  300;  in  1840- 
60,  366;  in  1870-90,  436; 
legislation,  578;  legislation  in 
World  War,  594;  Napoleonic 
Wars  and  America,  206;  prob- 
lem in  World  War,  594;  reci- 
procity, 302;  shortage  in  1915, 
595;  tonnage  duties,  189,  190; 
Virginia  colony.  03;  war  and, 
439 

Shoe  industry.  New  England, 
early,  70;  machinery,  337,  425 

Shop  committees.  622 

Silk  mills,  .335 

Silver,  9,  23;  decline  in  value; 
demonetizing,  481;  coinage, 
351,  480;  coinage,  act  of  1878, 
482;    free.    460;    mines,   341 


668 


INDEX 


Silver  dollar,  194,  311,  352,  480, 
482,  483 

Silver  Purchase  Act,  489,  492, 
494 

Single  tax,  460 

Six  Nations,   152-153,   157 

Slater,  Samuel,  197;  portrait, 
196 

Slave  auction  (ill.),  334 

Slave  trade,  134,  150,  178,  179, 
333 

Slavery,  16,  151,  184;  cotton 
and,  199;  end,  383;  in  terri- 
tories, 375;  introduction,  50; 
labor  of  slaves,  376;  real  cause 
of  Civil  War,  373 

Slaves,  105,  333 

Sleeping-cars,   348,   393 

Smith,  Capt.  John,  39,  57;  por- 
trait, 38 

Smith,  J.  Russell,  on  natural 
resources,   14 

Socialism,  460,  516 

Soil,  7,  558 

Soldiers,  mutineers  in  1783.  172; 
pay  in  Reivolution,  143;  re- 
turn to  civil  life  after  World 
War,  6)09 

Sons  of  Liberty,  126 

Soto,  Hernando  de,  23 

South,  blockade  in  Civil  War, 
378 ;  cities,  365-366 ;  commerce, 
1840-60,  356;  cotton  culture, 
198,  286,  420;  King  Cotton, 
332,  333;  Nortli  versus  in  1860, 
375;  railroads,  346;  reconstruc- 
tion after  Civil  War,  398; 
slavery,  50;  See  also  Cotton; 
Slavery 

South  Carolina,  166;  cattle,  94; 
negroes,  91;  nullification,  259; 
secession,  373 

South  Manchester,  Conn.,  335 

Southern  Railway  and  Steamship 
Assn.,  465 

Southwest,  trade  with,  363 

Spain,  American  possession,  22; 
attitude  after  the  Revolution, 
166,  167;  exploration  and  con- 
quest, 23;  Mississippi  River 
and,  162,  170,  171,  185,  201 

Spanish  dollars,  141,  193,  194 

Specie,   exploration,   169 

Specie  Circular  in  1836,  315 


Specie  payment,  legislation  for 
resumption,  477;  New  England 
and,  232;  resumption,  382; 
suspension  in  Civil  War,  379; 
U.  S.  Bank  and,  245;  Specula- 
tion, 231;  after  Civil  War, 
400;  after  the  Revolution.  164; 
before  1857,  353;  in  the  thirties 
300,  304,  312;  in  1883-84,  488; 
in  1893,  492;  land,  243,  246; 
overcapitalization  and,  512; 
railroads,  400 ;  Revolutionary 
era,  145  ;  World  War  and  after, 
615,  617 

Spinning  and  weaving  industries, 
197 

Spinning-jenny,  196 

Spinning-wheel,  99    (with  ill.) 

Sprague,  F.  J.,  429 

Squanto    (Indian),  64 

Stage-coach  advertisement  in 
1771  (ill.),  114;  colonial  coach, 
112    (ill.),   113 

Stamp,  British  (ill.),  125 

Stamp  Act,  123;  repeal,  126 

Stamp  taxes.  121,   123 

Standard  Oil  Co.,  465,  503,  526; 
fine  of  Judge  Landis,  508; 
Supreme  Court  on,  531 

State,  Dept.  of,   187 

State  banks,  231,  386;  operations, 
312 

State  bonds,  266 

States,  dishonorable  laws  about 
debt,  173;  enterpri.ses  versus 
private  enterprises,  266 ;  fed- 
eral money,  265;  public  lands, 
266;  quarrels,  178;  quarrels 
after  the  Revolution,  173; 
regulation  of  business,  532; 
repudiation,  319;  western 
boundaries  in  early  times,  159; 
Western  lands,  disagreements, 
1.59 

Steam  Engine,  11,  183,  195,  227, 
547 

Steam  locomotive,  279 

Steamboats.  Atlantic,  301;  de- 
velopment, 283;  Fitch's  second 
(ill.),  182;  Fitch's  third  (ill.), 
183;  Fulton's  Clermont,  227; 
Great  Lakes,  272,  359;  Mis- 
sissippi River,  228,  242; 
Mississippi  River  in  1860,  361 


INDEX 


669 


(ill.),  363;  ocean  service,  368; 
Ohio  River,  early  boat  (ill.), 
243 

Steel,  295;  Bessemer,  395,  544; 
low-carbon,  338 

Steel,  age  of,  543 

Steel  cars,  563 

Steel  industry,  513,  543-544; 
Homestead  strike,  454;  ingot 
making  (ills.),  545,  546;  pool 
of  1887,  464;  production  in 
1870-90,  423 

Stephen,  James,  214 

Stephenson,  George,  279,  280 

Sterling  iron  works,  100,  148 

Stevens,  John,  280 

Stock  dividends,  401,  493 

Stock  exchanges  at  time  of 
European  War.  591 

Stone,  building,  10 

Stourbridge  lAon  (locomotive), 
278   (ill.),  280 

Strikes,  Baltimore  and  Ohio  in 
1877,  447;  between  1873  and 
1896,  447;  bituminous  coal  in 
1919,  620;  Gould  lines  in  South 
west  in  1885-86,  450;  Home- 
stead, Pa.,  in  1892.  4-54;  in 
1919,  618;  Pennsylvania  R.  R. 
in  1877,  448;  police  in  Boston, 
619;  Pullman,  1894,  454;  rail- 
roads, 612;  telegraphers  in 
1883,  449;  U.  S.  Steel  Corpora- 
tion, 619 

Submarine  warfare,  595,  596,  600 

Subsidies.  308,  369,  370,  402,  438, 
577,  595 

Subwavs,  564 

Suffolk  Bank  of  Boston,  352 

Sugar,  colonial  trade,  80,  83 ; 
West  Indies  and  ^lolasses  Act, 
87 

Sugar  Act  of  1764,  122,  125,  126 

Sugar  Trust,  473,  525 ;  robbery 
of  the  government.  513-514 

Sullivan.  General  John,  157 

Supreme  Court,  187;  trust  de- 
cisions, 531-532 

Susquehanna  and  Tide-Water 
Canal.   269 

Sweat-shop.  336 

Sweden,  claims  in  America,  27; 
treat V  with,    173 


Swollen  fortunes,  515 

Taf t,  W.  H.,  529 ;  administration, 
529,  533,  560 

Talking  machine,  430 

Taney,  R.  B.,  310 

Tanneries,  70 

Tariff,  first  act,  189;  legislation 
in  1830-33,  258;  policy  after 
Civil  War,  384,  426;  question 
in    1908,   528 

Tariff  Commission  in  1882,  426 

Tariff   of   Abominations,    2.58 

Tariff  of  1816,  234,  252;  division 
of   interests,   235 

Tariff  of   1824,  254 

Tariff  of  1828,  256 

Tariff  of   1832,  259 

Taxation,  Civil  War,  381;  colo- 
nial, 109,  120;  Congress  and, 
172 ;  Congress  given  power, 
189;  Continental  Congress  and, 
141 ;  need  of  system  in  Revo- 
lutionary era,  146;  World 
War,  607 

Taxation  without  representation, 
125 

Tea,   130,   133,  189 

Tecumseh   (steamboat) ,  284 

Telegraph,  349,  427 

Telegraphers'  strike  in  1883,  449 

Telephone,  427 

Temperature,  7 

Tenant  farmers,  45 

Tenant  farming  in  the  South.  420 

Tenne.ssee.  170.  171.  184,  287;  as 
part  of  No.  Carolina.  159;  first 
census,  202;  population,  223; 
Settlement,    154 

Terra  Haute,  Ind.,  451 

Territorial  and  industrial  expan- 
sion, 1840-1860,  323 

Texas,  287 

Textile  industries,  252,  425; 
colonial.  99:  East,  293.  294; 
machiiierv.  197;  manufacture 
in  1840-60,  334;  Revolution 
and.   148 

Threshers.   .329 

Tide-water   canals,   267,   269 

Timber.   12 

Tin.  9 

Titusville,   Pa.,  341 


670 


INDEX 


Tobacco,  103;  as  money,  106, 
108;  exports,  150;  King  James 
and,  60;  preferential  treat- 
ment, 85 ;  Virginia  and  Englisli 
policy,  79;  Virginia  culture, 
58,  147 

Toledo,  272 

Toll  roads,   200 

Tolls,  263 

Tom  Thumb  (locomotive),  280 
(ill.),  281 

Tonnage  duties,  189,  190 

Tools,  early  farming,  61  (ill.)> 
62 

Townshend,  Charles,  120,  127; 
tax  program,   128 

Trade  center  as  influenced  by  dis- 
covery of  America,  22 ;  See 
Commerce;  Exports;  Foreign 
trade ;    Imports 

Trade  balance,  495,  497;  in  1878- 
98,  485;  in  World  War,  593 

Trade  unions.     See  Unionism 

Trading  companies  and  coloniza- 
tion, 34,  42 

Trading  with  the  Enemy  Act,  603 

Trafalgar,  213 

Tramways,  in  England,  275; 
Quincy,  Mass.,  276 

Transcontinental  railroad,  386, 
431 

Transportation,  colonial,  111; 
improvements,  turnpikes,  etc., 
199;  in  1870-90,  431;  in  1897- 
1914,  563;  in  the  West,  226; 
States  and,  266;  water  versus 
rail,  433 

Transportation  Act  of  1920,  610, 
623 

Transylvania  Company,  154,  156 

Travel,  colonial,  113 

Treasury  Department,  187,  190, 
319;  Civil  War  loans,  etc.,  379; 
crisis  in  1891-93,  490;  deficit, 
497;  deficit  after  1837  and 
1839,  333;  greenback  problem, 
475 ;  revenues  in  4  years  after 
1885,  489;  surplus  funds,  265 

Trenton,  N.  J.,  113 

Trial,  The   (ship),  67 

Tripoli,  212 

Trolley  cars,  429 


Truckee-Carson  project,  559 

Trunk  lines,  345,  360 

Trusts,  407,  469,  518;  Roosevelt 
and,  519;  Supreme  Court  de- 
cisions, 531-532 

Turks,  19 

Turner,  F.  J.,  299 

Turnpikes,   199 

Twain,  Mark,  363 

Tweed  ring,  402 

Twopenny  Act,   108 

Tyler,  John,  319 

Typographical  union,  340 

Underwood    Tariflf,    534 

Unemployment,   169,  452,  598 

Union,  early  lack,  139;  imminent 
break-up,  175 

Union  Pacific  R.  R.,  386,  401, 
505,  532;  completion  (with 
ill.),  391 

Unionism,  297,  340,  623;  organi- 
zation of  labor,  449,  450; 
politics,  406;  strength.  515; 
World  War  and  after,  618 

United  States,  share  in  War  pre- 
vention, 624 ;  territory,  expan- 
sion, 325;  territory  in  1783 
(map),  161;  War  organization, 
001,  604;   World  War,  599 

United  States  Bank,  191;  end  of 
first,  231;  management,  252; 
second,  1816,  237;  second,  and 
A.  Jackson,  306 ;  second,  and 
removal  of  government  de- 
posits, 309 ;  specie  payments, 
245 

U.  S.   Shipbuilding  Co.,  510,  512 

U.  S.  Steel  Corporation,  503,  510, 
513;  open  shop,  619,  620 

Urban  population,  541 

Valley   Forge,    145 

Van  Buren,  Martin,  298;  message 

in   1837,  317 
Vandalia.  264 
Vanderbilt,  Commodore,  394,  401, 

402 
Vehicles,    colonial,    113 
Vespucius,  Americus,  21 
Vincennes,   158 
Violence,  453,  456 
Virginia,  27,  29;  claims  to  west- 


INDEX 


671 


ern  lands,  159;  colonial  im- 
ports, 63 ;  colonial  live  stock, 
62;  Constitution  and,  180; 
early  industries  and  commerce, 
56;  farm  tools,  62;  "head 
right,"  47,  48;  land  tenure,  46; 
miscellaneous  early  products, 
61;  navigation  of  Potomac, 
176;  negroes,  91;  Raleigh  in, 
36;  royal  province,  39;  tobacco 
culture,  58,  147;  tobacco  ex- 
port, 79 

Virginia  Company,  37 

Vulcanite,  339 

Wabash  and  Erie  Canal,  275 

Wages,    after    Civil    War,    405 
American      Seamen,      436-437 
colonies,  50;    prices   and,  443 
prices    and,    1840-90,    404;    re- 
ductions     and     labor     distur- 
bances in  1877-86,  447;  World 
War,  598 

Wagon  trade,  244,  245,  252 

Wall  street,  187;  antipathy  to, 
445 

Waltham,  Mass.,  229 

Wampum,  106 

W^ar,  business  as  related  to,  241 ; 
colonial  trade  hampered  by, 
104;  debts,  624;  prevention 
problem,  624;  shipping  indus- 
try and,  439 ;  waste,  623 

W^ar,  Dept.  of,  187 

War  boards,  602 

War  of  1812.  business  after,  241; 
lessons.  233;  unpopularity  and 
follv.  220 

War  Trade   Board,   603 

Washington,    George,    132,    135 
account  book,  page   (ill.),  144 
election     as     President,     187 
letter  to  Lafayette  on  govern- 
ment  in    1780!   185;    on    State 
differences.    178;    on    the    cur- 
rencv,    145 ;    on   the   happiness 
of  the  country  in  1795,  203;  on 
VVestorn   conditions.    171  ;    por- 
trait.    188;     proclamation     of 
neutrality  in   1793.  205 

Waste,  314;  colonial  agriculture, 
93-94;  in  production,  555; 
timber,   12;  W^ar,  623 


Waste  products,  423 

Watauga,  158 

Water  mills,  62,  66 

Water  power,  11,  561 

Water-power  sites,   559,  560 

Water-proof  rubber  materials, 
339 

Waterways,  238,  558,  569;  colon- 
ial, 111;  inland,  201;  intra- 
coastal,  571;  renewed  interest 
in  1897-1914,  571 

Wealth,  286,  442 

Weaving   industry,   197 

Webb  Act,  537 

Webster,  Daniel,  on  protection, 
257;  on  the  tariff  of  1824,  255 

Wells-Butterfield  Co.,  364 

Wells,  Fargo  &  Co.,  349,  365 

West,  agriculture,  289;  canal 
construction,  274;  conquest  of, 
157;  discontent,  170;  early 
farming  and  hardships,  289; 
emigration  to,  152;  expansion 
after  the  Revolution,  184;  ex- 
pansion toward,  1840-1800, 
323;  industries  other  than  ag- 
riculture, 291;  isolation,  201; 
movement  to,  after  the  Civil 
War,  390;  settlement,  170,  243, 
251,  323;  trade,  223,  244,  288; 
traffic  with  the  East,  290; 
transportation  problem,  226; 
Washington  on,  171 

West  Indies,  23;  colonial  trade 
with,  102,  103,  116-117,  134; 
need  of  trade  with,  173;  New 
England  trade  with,  69,  97, 
101;  sugar  planters.  87,  148; 
trade,  167,  168.  214.  241:  trade 
destroyed,  168:  trade  recovered, 
181.  182;  triangular  trade 
with  Africa  and,  105 

Western  lands,  state  quarrels 
about.  159 

Western  Railroad.  343 

Western  Reserve.  160 

Wcstiiighouse,  George,  393;  por- 
trait. 4.32 

Westward  expansion,  1840-1860, 
.323 

Whaling,  96 

Wheat,  552;   large  scale  produc- 


672 


INDEX 


tion,  416;  Virginia,  56,  61; 
winter  and  spring,  417 

Wheeling,  Va.,  226,  245,  252, 
264,  344 

Whisky,  148,  185;  pool,  464; 
tax    202 

Whisky  Rebellion,  201,  223 

White,  John,  36 

Whitman,  Marcus,  325 

Whitney,  Eli,   198;   portrait,  198 

Wild-animal  life,  561 

Wild  animals,   14 

Wilderness  Road,   156 

Wilmington,   Del.,  28 

Wilson,  Woodrow,  534;  currency 
reform,  583 ;  legislation  of  ad- 
ministration, 534;  results  of 
antitrust  legislation,  539;  War 
declaration,    600 

Wilson  Tariff  Act  of  1894,  496 

Windmills,  62,  66 

Wine,  103,  128;  duty  on,  122 

Winthrop,  John,  41,  67 

Wire  nails,  425 


Wireless  telegraphy,  547 

Wisconsin,  327 

Women,  employment,  606 

Wooden  ships,  436 

Woolen    manufacture,    229,    252, 

255,  261;  British,  256 
Woolen  Trust,  529 
Woolens,  colonial,  84,  89 
Worcester,  Mass.,  344 
Workmen's  compensation,  533 
Workingmen's    party,    297,    298, 

406 
World      War,     America     enters, 

599 ;     America's     organization, 

601,  604;  railroads  and,  539 

Yellow  pine,  435,  550 

York      (locomotive),      281,      282 

(ill.) 
Yorktown,   145,   160 
Youth  fulness  of  United  States,  4 

Zinc,  9 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 
This  book  is  DUE  on  the  last  date  stamped  below. 


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